Classic cars: A foot off the gas?

21/02/2018 James Haithwaite, client services director, First Names Group,

Last month saw the release of New World Wealth’s 2018 Global Wealth Migration Report. The report revealed classic cars as the “best performing investment class” of the past 10 years, but also noted that there are signs that the classic car market is slowing down. What does this mean for current collectors and potential investors? Is the slowing of the market a cause for concern?

Collector cars have performed exceptionally well relative to other asset classes over the last five to ten years, so much so that they have become a solid asset class in their own right. We have seen them become attractive investments to a broad, active audience of all ages; today’s collectors are as likely to be investors as enthusiasts, or possibly both. 

In my opinion, the performance of classic car investments over the past decade has a lot to do with the evolution of classic car collection from something of a specialist ‘hobby’ to a mainstream asset class of interest to investors. For the enthusiast, there is still the thrill of sharing their passion with like-minded people at events like Goodwood and Le Mans Classic – or simply going for a ride on a sunny day! And for investors, there’s the potential of getting a significant return on their investment. 

According to the Knight Frank Luxury Investment Index, classic cars have increased in value by an incredible 363 percent over the past ten years. It is true however that the appreciation of most types of classic car has slowed down a little in the previous two years. The Historic Automobile Group Index (HAGI) has confirmed that their Top 50 Index, made up from a basket of rare collector’s cars (such as the Ferrari F40, Gullwing Mercedes and Aston Martin DB5s) has only appreciated 1.66 percent in 2017, versus the high of 29.19 percent achieved over the last three years.

That said, this slowing down is not surprising. No market could sustain the blanket compound return that classic cars were achieving. Further, the market is becoming more and more discerning with ‘must-have’ models continuing to rise while the older, less exciting models are losing ground. Kidston’s K500 reports that the average price per collector car sold at auction in 2017 was $507k, compared to $569k in 2014, which is typical of the change in landscape. With no noticeable major price correction (yet), interest in classic car collection remains.

I think it’s true to say that investors’ interest in asset classes typically waxes and wanes with the overall macroeconomic climate. At the moment, interest in stock markets, which until recently were at an all-time high, remain of interest to investors. Wine has also seen an appreciation of 25 percent over the last year, according to Knight Frank. 

In terms of current trends in the classic car space, poster cars from the youth of today’s 40- to 50-year-olds (who now have the funds to realise their passion) and modern hyper cars are both of interest. We’ve also seen a continued rise in a separate sub-class of limited series cars such as the LaFerrari or Porsche 918, which have risen far in excess of their ‘list’ price. Essentially this is due to their limited and selective supply from the manufacturer and the satisfaction that comes with owning a prestige car. 

In my experience, average cars remain average, but exceptional cars become more and more sought after. For most collections, just any old E Type Jaguar won’t do. They are looking for cars that stand out and are worthy of the ‘classic’ title. For example: one of the early flat floor cars, ideally one of the first 100 with outside bonnet catches, with a perfect history, restored by the marque expert to the original specification and with the all-important ‘matching numbers’ (indicating that the car retains its original engine and gearbox). 

I believe the classic car market will continue to thrive as it now has a much wider collector base – and that’s before taking into consideration emerging markets such as China and Russia, which are starting to show serious interest in the older cars. At the moment, the main market for classic cars is the US, where about 60 percent of collector cars are based, and this trend is set to continue for the foreseeable future.

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