The classic car market – real returns?

The first person who can predict the classic car market accurately will make a lot of money.
They would be the person who, in 1997, saw the imminent rise of the Ferrari Dino 246 and bought one for £50,000 and cashed it in in 2017 for £350,000; they would have bought a 1968 Porsche 911T in 2007 for £20,000 and sold it in 2017 for £100,000. And while they were back in 1997 they would of course have bought an Aston Martin DB5 for £100,000 and sold it in 2017 for £1,000,000.

Many of us would like to be that mythical person, the person who can see not only the future but also the future value of classic cars. And this perhaps is the problem with how we think about the classic car market – we tend to think only about increasing values and of cars as just another form of alternative investment.

The Hagerty Market Index is a classic car index that is seen as the true barometer of the classic car market. Recent analysis of this index along with other sources on the value and returns associated with collectibles by the London Business School and Credit Suisse gave some interesting insights into the classic car market. It showed that investors in rare books would have made seven times their money in real terms since 1900, investing in fine art would have a seen only a nine times return and they would have made 20 times from postage stamps and 30 times their money from jewelry. Investing in Premier Cru Bordeaux would have generated a healthy 65-fold return. The equivalent yield from classic cars would have been a staggering 242-fold return.

It’s this kind of headline grabbing (and unrealistic) number crunching that drives so much speculation around classic cars – who alive today could possibly benefit from an investment that began in 1900! This kind of analysis also fails to show how classic cars are quite unlike any other form of investment strategy – your ‘investment’ needs constant maintenance – cars cost you money even when they are just standing unused. Collectible paintings on the other hand don’t need servicing and they don’t break down. Vintage wine does not fall out of favour because of how the bottle is styled or the label designed. Gold does not need to be stored in air and humidity conditioned facilities and you don’t need to waxoil the obverse of a rare coin. If you want to good returns there are much less costly ways to do it.

Haggerty’s index with its prices of 50 models from 19 marques and notional 21,000 actual cars does not completely capture the markets unique complexity or possible variations of condition and age. As an example, there are 4 distinct series of Jaguar E-Types with three body styles across 14 years, ranging in value from about £55,000 to over £400,000. Nor does it capture how fashion and taste play a part – own a classic car for more than 10 years and you will see the popularity of that car wax and wane and the price rise and fall in parallel.
It’s important to remember that in the above research, the seemingly staggering returns on classic car ownership and on every other category of collectible was trounced by shares, which over the same period would have generated a 387-fold real return.

Reading research like this and following Haggerty’s index turns us all into speculators, we become obsessed by the ‘bubble bursting’, we forget that the value of classic cars will always rise and fall. Perhaps worse of all we forget what classic cars are actually about.

Thankfully there are still plenty of people who are buying classic cars for the right reasons – because they love how they look, sound and smell. Or, because they remind them of childhood car journeys with parents or they always dreamed that one day they would own the real version of that dinky toy they cherished as a child.

These are the people who will get the real returns – for them the joy of owing a classic car is the only reward they need.