Classic cars: a great 'lifestyle' investment or a road to ruin?
Published 31/05/2015 | 02:30
Classic cars have been grabbing headlines over the last couple of years thanks to the eye-watering amounts of money that certain vintage Ferraris, Porsches, Aston Martins, Jaguars and Mercedes have been fetching at auctions all over the world. But is it another asset bubble that is about to go pop?
Last August, a 1962 Ferrari GTO broke the world auction record for the most expensive car, selling for $38m (€28.5m), while a 1961 Ferrari 250 GT California spider, once owned by French actor Alain Delon went for nearly $19m (€16m) in Paris last February.
But if you are a car enthusiast born before 1975, you might be getting a sense of déjà vu on reading this. As you may recall the huge surge in classic car values back in the late 1980s which collapsed during the early 1990s recession. Chris Routledge, of London-based Coys Auctioneers, has been in the classic car game long enough to have worked during both booms.
He says a good number of those who bought in the 1980s were well-to-do enthusiasts who regarded the cars as a good place to put their money, "an organic investment" as opposed to a purely speculative one, and held onto their cars even after values collapsed.
"Then things settled down and something strange happened - the rest of the world opened up," he said. Thirty years ago, the market was confined to the US and western Europe, but now it's a truly global market, he said.
Super-rich buyers from Eastern Europe, South America, Asia, Russia and Mexico are looking to get into top classic cars as a "lifestyle choice", which means entry into prestigious events like the Goodwood Revival in England, the Pebble Beach Concours D'Elegance in California, or the Mille Miglia in Italy.
"These are now lifestyle choices for a whole new breed of people. There is the same number of cars, but with five times more people wanting to be part of the fun, that's driven prices up to the current levels that we see."
The current market boom dates from about 2004 but really took off after 2008, but the risk of prices falling as quickly as they did in the 1990s is far lower this time round, Routledge insists, because there are so many more buyers for fewer cars.
Claire Evans, editor of Classiccarprice.com, a website that monitors global classic car auction prices, also dismisses rumours of market decline.
"There is quite a bit of talk about the classic car price bubble bursting this year, but what's actually happening is that price rises are slowing down to a more realistic and sustainable level. Market experts predict that the values of the right cars will rise by around 5pc this year."
So what are the 'right' cars? "The Jaguar E-type, the original Mercedes SL, original Porsche 911 and 1960s Astons and Ferraris are some of those that have gained most in value in the latest boom," said Evans.
So if you have at least €15-20k (and preferably more) to invest, it seems you could do far worse. And if the idea of spending any of your time maintaining them doesn't appeal, there are plenty of specialists around now who can do that for you.
But another option is to hold out for a genuine 'barn-find', which means a special car that has been laid up for years but remains totally original, complete and unrestored.
They might be undriveable basket cases, but such cars now command a premium, judging by the recent sale of the Baillon Collection, a lot of 59 long-lost, mostly rusty but special vintage cars that together fetched an impressive $28m last February.
"At the moment, the people love the barn-find, they love the idea, they love the romance of it, and that's really what's driving the value of those up," said Routledge.
Evans said: "It affirms the belief among some collectors that it's best to buy an original, unrestored barn-find car and simply keep it for a few years as it is."
So patina beats polish? "I wouldn't guarantee that originality will trump restoration every time, but the best investments are likely to have the following attributes: being a desirable model and specification, have a fully documented history and full service history, low mileage, stored in a dry garage when not in use, fitted with the correct original engine and no undesirable modifications," said Evans.
"If you can add a famous previous owner to that list, you should be on to a winner."
Premium classic cars are thin on the ground in Ireland, which usually means a short trip over the Irish sea to find a suitable car, where you'll find a vibrant market and several specialist auction houses.
Those lucky enough to already own a decent car here have been taking advantage of the current market by selling their own cars to Britain.
John Tierney of the Irish Ferrari Owners' Club says quite a number of its members have done this. "Three reasons: rising values, strong sterling, and reclaiming VRT (vehicle registration tax) make it very attractive. Even some of our long-term owners have cashed in and I really can't blame them, as some have realised a very good return on their initial investment."
Many genuine enthusiasts are undoubtedly annoyed at how the current boom has put several dream cars out of their financial reach, but if you buy a premium classic car you'll still be welcomed into the classic car scene - as long as you drive it regularly.
British motoring journalist and classic car owner James Ruppert has a simple test to weed out the truly genuine enthusiast from the semi-speculative.
"If the classic car market collapsed tomorrow and every car was worth a fiver, would you care? The correct answer is that you wouldn't give a stuff."
Sunday Indo Business