One of the most fascinating areas of luxury spending is on collectable items, such as classic cars. As well as providing considerable driving enjoyment, many buyers consider a classic car to have great investment potential.
While many car lovers may be put off investing in a classic car because of high upkeep and maintenance costs, sale records show that buying the right classic car can be a fantastic investment with the potential to make you a lot of money. At the very top end of the marketplace, a Ferrari 250 GTO originally built for British racing legend Sir Stirling Moss (right) sold for a record $35m (£22.7m) in 2012, when a decade earlier it had been bought for just $8.5m. While this may be an extreme example, it’s a clear demonstration of how much value a classic car can gain over time.
Classic car values defy global downturn
Despite the devastating effects of the recent recession on the general new and used car markets, the classic car market remained stable. As global economies have recovered over the past year, there has been a noticeable rise in many classic car values as investors look for secure places to store their hard-earned wealth. According to an index of classic cars compiled by Historic Automobile Group International (HAGI), valuations increased by a staggering 19% in the first nine months of 2012. In addition, since 1980, HAGI’s index of collectible Ferraris has grown on average more than 15% every year.
The outlook is positive for the wider classic car market too. Specialists have estimated that there are over 850,000 pre-1972 vehicles in the UK that have hit the bottom of their depreciation cycle, and it looks as though the classic car market is in the process of another boom – that doesn’t just benefit the super-wealthy.
While investing in a car at the top end of the market, such as a Ferrari, means that returns will likely come quicker, it will set you back at least £100,000. Investing in a worthwhile classic car doesn’t have to be so expensive, for example, according to investorschronicle.co.uk you can get an iconic Jaguar E-Type for about half the price (£50,000) which could make you thousands back in years to come when you sell it. Alternatively, you can invest in cars that are even cheaper such as a Triumph TR4, which you can get for around £10,000- £12,000. While a Triumph TR4 isn’t likely to make you into a millionaire overnight, you won’t lose any money on it and it could double in value in the next 5 years, like the TR5 models already have. In addition, cars such as an 1966 Mini Cooper could gain over £18,000 in value.
So, before discarding the idea of investing in a classic car because of the maintenance costs that it may come with it, take into consideration the potential financial benefits. Investing in the right classic car is an important decision that requires a lot of research to ensure that it is a worthwhile investment. If you’re feeling lost or confused with the best ways to manage your money and what areas to invest in, consider using an investment management firm that can offer you their professional advice and support.