re: Classic cars prove to be an investment vehicle with top performance
Forget stocks and shares, the FT and the London Stock Exchange: the truly savvy investor is buying up classic cars, reading Octane Magazine and hanging out at Goodwood racetrack. And if you are up for a flutter – in investment terms – then go straight for those red cars made in Italy. Classic Ferrari values are accelerating faster than the heroic driver Fangio ever did.
In the last 12 months alone the cost of top-end vintage Ferraris has risen by 55%, thrashing competition from Mercedes Benz (a mere 24% increase) and Porsche (13%), according to the Historic Motor Group (HMG), which tracks and publishes prices.
Dietrich Hatlapa, a former investment banker and founder of HMG, said the soaring value of Ferraris and other classic names cannot easily be explained by any one factor. "It's a cocktail of things: rarity, technical sophistication, racing pedigree and continuing competitive success. But what you can say is everyone who buys one of these cars is passionate about them."
The supremacy of the Italian marque was underlined three weeks ago when a 1967 Ferrari 275 Spyder sold for $27.5m (£17.5m) at an auction in California – the highest price ever recorded at a US public sale.
That is climbing towards what is believed to be the highest sum paid for any car, the $35m paid last year for another Ferrari – the 1962 GTO 250 made originally for British racing legend Sir Stirling Moss.
But it is not just the most rare and expensive Ferraris or Bugattis that are soaring in value, it is a whole range of cars all the way down to mass-produced volume sports cars of the past such as E Type Jags, the best of which can now fetch £80,000 apiece.
All the figures from the Historic Motor Group are fed into an index and then compared with other investment "asset classes" and published as a Wealth Report by upmarket London estate agent Knight Frank.
This shows that in the 12 months to the end of June the value of classic cars as a whole was up by 28%, which compared with a rise of 12% for the FTSE-100 index of leading shares and a 23% slump in the price of gold.
Measured over 10 years the performance of automobiles is even more stunning, with their value up by 430% compared with 55% for the FTSE and 273% for gold – the latter always regarded as a safe haven in turbulent financial times.
Hatlapa believes that classic cars can sooth the furrowed brow of an investor in bad times. "When there is a financial crisis some worry that their stocks and shares may become worthless. It is reassuring to see that tangible [car] investment in the garage. It brings a smile to your face and if you choose you can go out and drive it. There is the fun factor."
Although you are likely to see pictures in the media of very famous or very rich car enthusiasts – think Rod Stewart, Pink Floyd drummer Nick Mason or JCB magnate Sir Anthony Bamford – Hatlapa denies that classic-car buying is an elitist activity.
"It's very much a mass phenomenon with a huge rise in events. If you really want to get involved, as many do, you can pick up a vintage model, even a Hillman Imp or something, and do it up in your own garage. If you go to the Goodwood Revival race meeting next weekend you will find thousands of ordinary people have brought their own [vintage] cars."
The Goodwood Revival, described by organiser Lord March as the Glastonbury of the motor-racing world, is already sold out and follows on from the Goodwood Festival of Speed earlier this year, when nearly 200,000 people turned up.
But it is the modern Formula One race tracks elsewhere that also help build values for historic cars. The continuing success of Ferrari at the top level of motor sport is considered to help keep prices up. Rarity helps too – fewer than 50 vehicles were made of some versions of the Spyder. The figures on car values speak for themselves, although there have been some reports that volumes being sold at auction have been in decline.
But cars are not the only alternative investment going up in price. The Knight Frank Wealth Report also shows antique stamps rose 7% for the 12 months to the end of June and have risen by 60% over the last five years and 255% over the last decade.
Coins were up by 9% over the last year and have shot up by 225% over the last 10 years.
Antique furniture is down in value 3% over the year and nearly 20% on 10 years ago, while fine art is down 6% on the year but up 183% over the decade.
Why these changes? Andrew Shirley, editor of the Wealth Report, notes that both wine (up 3% on the year) and art are historically more volatile even than stocks and shares.
"This is not only due to economic conditions, but also to changing trends and fashions within the luxury collectibles market that can quickly create and deflate bubbles. This means index results for an asset class may not necessarily reflect the performance of individual pieces or works of art," he explains.