Stars of the future

While savvy investors are adding classic cars to their portfolios, the real smart cookies are identifying the ones that aren’t even classic yet. Pictured: Lamborghini Aventador 

Have you ever fancied dabbling in the classic car market? If the answer is yes, then you’re not alone. New research suggests one in five investors are now considering the inclusion of a vintage set of wheels into their investment portfolio. 

Over the past 25 years, some classics have proven to be an excellent choice of investment. This has been confirmed by Historic Automobile Group International (HAGI), which compiles an index of mid- to top-end classic cars.

HAGI shows how high-quality classic cars have outperformed against other, more established, asset classes, such as prime London property and art. Yet, despite this rise in prices, the financial world remains divided as to whether this growth is sustainable or is heading in the same direction as it did in the early 1990s. 

Back then, having been overstimulated by ungoverned borrowed money, market values unceremoniously nosedived as the recession started to bite.

Since those dark days of chancers and plunging prices, the classic car market has found a new breed of wealthy investors from across the globe – ones who are less likely to liquidate their stock should values take a tumble again. Of course, this doesn’t guarantee anything, but it does add a certain amount of confidence as to the robustness of the market and its credibility. 

Looking at the HAGI Index, prices soared to a record all-time high in 2015, but have since cooled off slightly. Forecasters now expect a more sensible seven to eight per cent rise over the next three years. For the newcomer entering the market, the key to maximising investment is to identify a future classic before it becomes known to a wider audience, which is easier said than done. 

This will demand both extensive knowledge and foresight – a little bit of luck always helps, too – and should be approached with exactly the same due diligence and caution as any other type of asset investment. 

What makes a classic?

Before anything else, however, any prospective classic car owner must first determine what constitutes a classic car and how much it’s actually worth. 

“Everyone has their own definition, their own set of criteria, their own ideas about what makes a car ‘classic’,” says Paul Michaels, CEO of Hexagon Classics. “But the three common parameters are desirability, scarcity and heritage.” 

Age, according to Michaels, should be a secondary consideration. “Just because a car was built in the middle of last century doesn’t mean it automatically becomes more valuable than a modern day supercar. The new £1.9 million Bugatti Chiron is a good case in point.

"By virtue of its exclusivity [only 500 units are planned], and it being the fastest and most expensive production car ever built, it will undoubtedly command a huge premium, should one ever be offered up for sale.”  

TV’s Mike Brewer, who presents Wheeler Dealer, believes cars from the 1980s or 1990s are now seen as the rising stars of the future, especially those that had a cult following when new. “Not so very long ago, a Mark 1 VW Golf GTi had a near-worthless second-hand value, but today this iconic hot hatchback, in pristine condition, can command a premium north of £15,000.” 

Newer options

There are even newer cars that could make sound, long-term investments, too, he says. “The first generation of Audi TT was pivotal in shaping the current automotive industry and should be valued as such.” He thinks the BMW i8, the first all-electric production supercar, is also worth considering as it was “a game-changer in the way we now view alternative fuelled cars”.   
  
This brings us to how you identify the classic cars of the future. Whether it’s a speculative investment or one bought out of passion, some makes of car are obvious classics and will always be sought after. British marques remain a popular choice among collectors.

Taking a mean average of the cars sold at auction over the past year, it shows that certain classic Aston Martins performed the best, rising in value by 80 per cent, followed by Jaguar, up 68 per cent, and Austin Healey, up 52 per cent. Bentley, meanwhile, during the same period, rose 39 per cent in value. 

But you don’t necessarily need to look to the past to find a future classic. Some current production cars are deemed classics before they’re even rolled off the production line.

By applying the same rules as above – appeal, rarity and provenance – it’s possible to buy tomorrow’s classic today. Think along the lines of the new Porsche 911 GT RS (pictured) – the race and track version of the road-going sports car – and you won’t go far wrong, especially if it has a convincing racing pedigree. 

Choose wisely

That said, James Haithwaite, First Names Group’s classic car expert and Client Services Director, notes that not all cars, even by the same marque, are equal. 

“The headline increase in value for a particular marque can be misleading. For example, Porsche has, overall, increased in value substantially over the years, but not all models have increased at the same pace,” he explains. “In 1994, a 1973 911 2.7 RS was around half the price of the new 911 model of the period, the 993. 

“The 993 initially depreciated, as most new cars do, but in recent years it’s performed strongly due to being the last of the air-cooled 911s. Taking inflation into account, it’s now worth around £60,000 for a good, unmolested and normally aspirated example.

"However, the better performer by some margin is the 2.7 RS, which was made in small numbers and is now worth in excess of £500,000 and regarded as the ultimate driver’s 911.”

Haithwaite continues: “There are also the cars produced recently by manufacturers, again in smaller numbers, that good and consistent customers are ‘invited’ to purchase – for example, the LaFerrari or F12 TDF, Porsche 918 or 911R, McLaren P1 and Jaguar F Type Project 7, to name a few.

"These have all appreciated on delivery, owing to their quality, the finite numbers produced and – above all – fantastic marketing programmes causing high demand and often an increase in price two or three times over list.”

Credit agreements

With money being relatively cheap to borrow, it would make sense to finance a classic car purchase through some type of lease or HP agreement. “Unlike the lending frenzy of the 90s, current credit legislation now requires us to lend responsibly and check for affordability”, explains Steven Halstead, COO of JBR Capital, which specialises in arranging loans for classic cars.

“A typical finance agreement would be with a 20 per cent deposit, the balance payable over a three- to four-year period, and a one-off balloon payment at the end.” 

He recommends a classic car be seen as long-term investment, perhaps 10 years or more – if the market continues on a similar trajectory as recently, the loan interest would soon be offset against any gains.

Irrespective of how a classic car is purchased, other inescapable costs of ownership can’t be ignored. Insurance is the most obvious and, again, there are specialist insurers that cater solely to the market. Savings can be made on premiums by agreeing an annual mileage limit (usually 3,000-5,000 miles) and keeping it garaged throughout the year. 

Another, more sobering, cost will be the maintenance and servicing of a classic car. Older cars demand attention, and obtaining essential parts, especially for those rare and more exotic machines, can be both expensive and time-consuming.

Having satisfied the practical and financial preconditions of ownership, Mike Brewer has one more piece of advice: “Resist the temptation to buy the first car you see. In the world of classic cars, you can be certain of two things: you’ll eventually find a better example, and it will be worth waiting for.”