One would easily be forgiven for thinking of classic cars as the toys of millionaires, and some of the biggest and best collections we have available in South Africa today belong to exactly those people.
However, these icons of motor engineering are also beginning to find their way into the hands of shrewd investors. The desire to amass these vehicles is no longer driven by passion and nostalgia alone, but has proven to be a lucrative business opportunity. The rarity and the future value of classic cars is what they look for, with some vehicles selling at auction for hundreds of millions of Rands.
The value of the classic car market in the UK alone is said to be about R95 billion. Internationally, the value of the classic car market has appreciated more than that of jewellery or art in the last decade.
There is a consistent rise in value, and if Hollywood keeps driving these things over cliffs in films, there’s no end to the spike in sight.
But what does value mean? What makes a classic car valuable? More importantly, who is driving them? Let's take a closer look.
Various price indices, including that compiled by the Historic Automobile Group International, shows that Mercedes-Benz has commonly been the best performing marquee.
The brand's vehicles have increased in value by just over 85% in the last couple of years, with Mercedes models from the 1970s becoming the most sought after, with prices rising steadily.
In 2010, a 1937 Mercedes 540K Cabriolet sold at Stephan Welz & Co. for R7,37 million.
Ferrari, as one would expect, has also done well. So has Porsche, which has continued with its 911 range for some years. The 1970 and 80s versions are coveted by collectors.
Other popular vehicles include the sports version of the BMW 6 series, and a firm favourite, the devastatingly beautiful E-Type Jaguar.
Among South Africa’s high net worth individuals – the richest people in the country – the highest growth in spending has been on classic cars and exotic, wild animals.
Could they just be splurging? Possibly…
But, they didn’t become millionaires by being terrible business people, either. The price of these classic cars has shot up by 163% between 2007 and 2015, making it the best performing investment class for HNWIs over that period.
New World Wealth released a wealth report just a few years ago, showing that the most popular classic cars among South Africa’s high net-worth individuals include the following:
In 2014, a 1962 Ferrari 250 GTO sold at Bonham's Quail Auction for $38,115,000, which is just way too depressing to even convert over into rands.
In terms of return on investment, Ferraris from the 50s and 60s seem to perform the best. A 1960s Ferrari Dino, for example, might have sold for a couple of thousand in the 1980s, but will be selling for a good couple of million today. Of the top 10 most expensive cars ever sold at auction, no less than six of these bear the ‘prancing horse’ symbol.
If you have the money to invest in a car, any post-WWII Ferrari is a pretty safe bet.
Of course, not all classic cars make for good investment. That rusty passion project you’ve been labouring over could sooner bankrupt you than make you a fortune.
It’s true that classic cars are a habit of the heart. Enthusiasts and investors aren’t always two separate things, but it’s important not to confuse collecting with investing. You may love your car, but you still need to know what’s going on with its value. In fact, according to Coutts bank, the value of classic cars has seen a bit of a general decline, with photographs and rare musical instruments now on the rise.
So, what’s a smart move? According to classic car experts, the younger classics deliver the best return on investment, such as the 1970s, 80s and early 90s models with V8 engines and manual transmissions. There’s an old expression among collectible car dealers which goes:
'If the roof comes down, the price goes up!'
Soft-tops and convertibles are always big attractions. Vehicles manufactured in the 1920s and 1930s also have high values, but limited buyers. In auction, some of the contributing factors affecting the value of cars include rarity, desirability, low production volumes, condition and the generation effect. It takes a bit of homework or a deep knowledge of the industry to know which of these vehicles will appreciate in value and which won’t. Some people, of course, find the real value and real return on investment in the joy of ownership alone.
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