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Classic cars are big investment opportunities

While most of us consider a sports car to be a plaything of the rich and famous, they are proving to be one of the best investments around. Not just luxury sports cars like Ferraris, Porsches and Lamborghinis, but also premium brands like Bentleys and Rolls-Royces. These top-of-the-range cars have seen their values rise by an incredible 430 percent in the last 10 years. At the other end of the scale, a run-of-the-mill family car is likely to be worth just a fifth of its initial selling price.

 

The value of prestige cars is tracked by international property consultants Knight Frank as part of its luxury goods index, which also includes coins, art, gold, wine and stamps. Luxury cars have outstripped all these alternative investments in the last decade, which will please upmarket petrol heads no end.

Andrew Shirley, editor of the Knight Frank luxury goods report, says: “Gold is a tangible asset and has done really well in recent years but there’s no great enjoyment to be had from it. A classic car is something you’re going to enjoy.”

The grey area is what defines a car as being a classic, and when does it become vintage. While this is open for debate, what is less arguable is the type of brands more likely to hold their value. This list is long and includes Ferrari, Porsche, Aston Martin, Bugatti and Maserati. It also helps if the car has had a celebrity owner or was driven in a well-known or historic race. For example, a rare 1954 Mercedes Benz W196, in which Formula 1 world champion driver Juan Manuel Fangio of Argentina won two Grands Prix, sold for £19.6 million at an auction in July.

London-based Dietrich Hatlapa is a former investment banker and founder of the Historic Automobile Group. He says: ‘’When there is a financial crisis some worry that their stocks and shares may become worthless. It is reassuring to see that tangible investment in the garage. It brings a smile to your face and if you choose you can go out and drive it. There is the fun factor.”

Cars also have an international appeal. A Porsche or a Bugatti is admired whether you’re in Beijing, Bangkok or Bukit Timah. This is unlike art which may only have regional or national appeal. For example, wealthy Chinese are more likely to buy Chinese art but don’t necessarily care where their luxury car comes from.

In Singapore, super car sales have shot through the roof as wealth and the number of cars on the road has increased. The number of Porsches on Singapore’s roads has rocketed from 559 in 2002 to 3,243 by 2012. The number of Maseratis has exploded from just 30 in 2002 to 541 last year. While the money spent may seem outrageous, the potential returns in years to come could justify the expense.

But Hatlapa sounds a note of caution before you rush out to Singapore’s Leng Kee Road, where most of the top-end sports car dealers are located. He adds: “In an ideal case you should bring enthusiasm for classic cars first and ask yourself if you could have fun with it and build expertise. This would be useful because you need to inform yourself in order to avoid buying the wrong asset. There are many mediocre cars around and the danger is that they are being offered in the market for the wrong kind of money.”

Another universal investment adage is that past performance is no guarantee of the future. While we have seen a real surge in the most exclusive cars of all, this may not continue in years to come.

There’s also the huge capital outlay to consider. A brand new Ferrari F12, bought from Singapore’s only Ferrari dealer ItalAuto, will set you back a cool $1.5 million, without a certificate of entitlement (COE). However, in the last 12 months alone the cost of top-end vintage Ferraris has risen by 55 percent, according to the Historic Automobile Group. The investment value of the Italian marque was underlined earlier this year when a 1967 Ferrari 275 Spyder sold for US$27.5m at an auction in California – the highest price ever recorded at a US public sale.

But thankfully more “modest” cars with a lower capital outlay, such as a Porsche or a Mercedes Benz, might prove a shrewder bet. Examples would include E Type Jags and the Mercedes-Benz 300SL Gullwing Coupé.

But what about the costs involved in classic car investing? There are transaction costs along with those for holding the asset including storage, insurance, and maintenance. Paying for restoration work could also make a big dent. 

 

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