Classic cars: are they a good investment?
Investments / 2017.04.12

Classic cars: are they a good investment?

SPW Contributors Sanlam Private Wealth

Thousands of classic car aficionados are expected to attend the prestigious 2017 Knysna Motor Show, sponsored by Sanlam Private Wealth (SPW), later this month to view some of the most head-turning heritage vehicles in South Africa. Many hope to one day own one of these iconic cars, not only for emotional reasons but because they believe it will increase in value over time. But are classic cars a good investment, or should they remain just a ‘passion’ hobby?

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Avid classic car collector and expert Brian Bruce says that like art and architecture, classic cars represent the societal style of a particular period, following the technological, styling and socio-economic trends of the time. Many people buy them out of nostalgia for a bygone era or to reconnect with brands or models they grew up with.

Marque and mystique

But what makes a classic car collectible? ‘Traditionally, buyers have been motivated by emotion, mystique, performance success, styling, engineering and marque, but investors are increasingly driven by rarity and future value profile,’ Brian says. ‘The benchmark collectible car is the Ferrari – one regularly sees these iconic cars going for between US$20 and 30 million at international classic car auctions. They’re beautifully designed, highly engineered cars with excellent provenance. Other iconic classics include the E-type Jaguar and the Austin or Morris Mini, which won the Monte Carlo Rally four times.’

Brian will have eight of his own heritage vehicles on display at this year’s Knysna Motor Show, including an extremely rare 1935 Jensen Ford and an original 1935 Bentley Sports Coupe. His recently restored 1954 Austin-Healey 100 Le Mans will debut at the show.

Consistent rise in value

Leon Strümpher, Portfolio Manager at SPW’s Knysna branch and himself a classic car investor, says the market for classic cars has experienced a consistent rise in value over the past two decades. ‘The value of the classic car market in the UK alone is said to be about £5.5 billion. According to the Knight Frank Luxury Investment Index the value of the classic car market internationally has over the past 10 years appreciated more than that of watches, wine, jewellery, stamps and art,’ he says.

The latest price index compiled by the Historic Automobile Group International shows that Mercedes-Benz has been the best performing marque, increasing in value by just over 85% over the past three years. Ferrari also did well, posting an increase of 65% and sending Porsche into third place with a rise of almost 60%.

A 1960s Ferrari Dino that might have sold for R25 000 in the 1980s may sell for as much as R6 million today, Brian says. An E-type Jaguar worth R50 000 in the early 1990s might fetch upwards of R2 million in 2017. ‘Generally, the most desirable cars are open-top sports cars – convertibles and roadsters. The rule of thumb is “hood down, value up”.’

The best performing classic cars in terms of return on investment have been the Ferraris from the 1950s and ’60s – the highest price paid for a Ferrari is believed to be more than US$50 million for a 1960s Ferrari 250 GTO, he says. ‘Certain models of Jaguar, Aston Martin and Mercedes are also top sellers as are some Bentley, Duesenberg and Bugatti models from the pre-war era.’

Some of the increase in value of classic cars over the years has resulted from a distinct shift in ownership profile, with older owners selling on their ‘used’ cars at second-hand prices to early collectors buying into future value. ‘We’re also seeing a trend towards preservation rather than restoration, with “barn-find” cars that have been hidden for years being preserved to retain their originality – and hence, their value – rather than being subjected to full restoration.’

Not all cars are equal

Leon points out that not all cars are equal when it comes to investing in classics, and not all are good investments. ‘It takes a really deep knowledge of this industry and a lot of homework to know which ones will appreciate in value. Investment cars vary dramatically in price tag and returns, depending on their rarity and condition, and the size of the buyer’s pocket.’

He suggests looking at the younger classics: 1970s, 1980s and early 1990s models, V8 and preferably manual transmission. Mercedes models from the 1970s are becoming sought after, with prices rising steadily. ‘The key is to get a vehicle from a good marque, such as the German, British and some American brands, before there’s great demand for that model.’

Brian’s advice is to go for brands that have continued with their ranges through the years, such as the Porsche 911 range. ‘There have been various iterations of the 911 models, and the 1970 and ’80s versions are now being hunted down,’ he says. Other desirable brands include the sports version of the BMW 6 series, Maserati, Mazda MX5, and Toyota sports cars.

Price drivers

So what’s driving the prices of classic cars? Leon says classic cars are becoming scarcer every year, as many leave our shores for Europe or the US. For foreign buyers, South African vehicles are well priced, even when transport costs and taxes are taken into account.

According to Brian, TV shows, car shows and the availability of information on the internet have increased public awareness of classic cars and the prices they can fetch, which has increased the number of sellers and buyers. South Africa has an active if somewhat fragmented classic car community with a good number of collectors, online sales and a full diary of shows throughout the year.

Not for the faint-hearted

‘Investing in a classic car can be an exciting and extremely rewarding venture, but it’s not for the faint-hearted,’ Leon says. ‘It requires time and attention as well as resources – such as real estate to house your vehicles – and you need to do your homework. To avoid future pitfalls you should look for rust, do regular maintenance, replace perished parts with original parts and try to acquire a car with low mileage.’

Head-turners at the Knysna Motor Show

The Knysna Motor Show, sponsored by SPW, will be held on Sunday 30 April on the Knysna High School sports fields on Waterfront Drive. Organised by the Garden Route Motor Club, the event will feature some of the most distinctive and rare classic cars and motorcycles in South Africa. The participants are personally invited to display their vehicles, which ensures that only the finest models are exhibited. Gates will be open from 09:30 to 16:00. Tickets at the gate.

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