The Business of Classic Cars
Interest in the classic car has never been stronger. Car concourses such as Unique Special Ones recently held in St. Petersburg, and Salon Prive and Concours of Elegance in London, have brought together some of the finest classic cars in the world. Ferraris, Bugattis and Bentleys have soared by 28% in value (correct as of June 2014), outstripping gold (which has slumped by 23% in recent years), art (down by 6%) and luxury London property, and some sources say this is thanks to rising demand from wealthy Asians. “Classic cars are proving to be one of the most lucrative and robust investments around, providing the right marque and model is chosen,” says Gary Axon, Goodwood Motorsport spokesman. “Over the past three to four years, values for older classic motor cars at auction or in dealer and private sales have bucked the global recession, proving as prudent an investment as the other two current leading recession-proof commodities, fine art and vintage wine.”
I spoke to James Knight, Group Director and Auctioneer of the Bonhams Motoring Department, who is an acknowledged expert and has handled many record-breaking auctions, to give me an overview of the current buying trends. Only in July last year, his company recently broke all records with the sale of the highest price ever paid for a car at auction ($30.6 million – almost £20 million), with a rare 1954 Mercedes-Benz W196, in which five-time Formula 1 World Champion driver Juan Manuel Fangio of Argentina won two Grand Prix. I asked him whether this recent record-breaking price is setting the standard, or whether it is more of a one-off. “It broke all records by almost doubling previous records,” Knight reveals. “It was an extraordinary motorcar, and it was always going to appeal to an established motor car collector who understood the market, a connoisseur who already had large collection of cars. It’s the only car like it out of captivity!”
Knight told me that “buyers in Asia, Russia and the Middle East are for now very few and far between,” but he admitted he is aware of emerging markets, “fundamentally, the market growth is underpinned by the USA and Europe. Asia, in particular China, and the Middle East just don’t have a history of classic cars but the Japanese, however, have been collectors in the motorcar market for decades.”
Knight seems somewhat frustrated by the car-buying trends of the new generation of HNWs. “In Asia or the Middle East, they go for the latest high performance luxury cars, like the latest Phantom,” he says. “In Moscow, they want to be instantly recognizable on the street, so they wouldn’t understand a 1950s Aston Martin. But classic motor cars are for people who have a passion for them.”
A classic car investment is not without its risks, however. As well as ensuring you buy the right marque, maintenance can also be costly. But, advises Knight, “as long as you buy sensibly and the car doesn’t need a lot of work doing, there’s a good chance it will increase in value two or three years down the line.” UK Radio DJ and car fanatic Chris Evans can boast one such example of this. Following his purchase of a 1961 Ferrari California Spyder in 2008 for £5 million, he confessed that, “it seems a lot of money, but in five to 10 years’ time, it’ll be out of my range.” Investing in classic cars, it would seem, it as much about the increasing value of the car as it is about straightforward appreciation, and so investors need to be canny enough to buy accordingly.
But that isn’t to say that buying a classic car should solely be done with just an investor’s cap on. “In recent years, wealthy people have had money earning next to nothing in the bank, so they put it into something they can enjoy and buy a car,” says Knight, who is very adamant that you have to be passionate about cars before entering the market. “Newcomers must first and foremost have an emotional attachment and desire to own a collectors motorcar,” he says. “Quite frankly, it’s not a market just for investors, as it would be a very boring and sorry place, and thankfully, whilst most of the people we see in the collectors motors market have got half an eye on whether it’s going to make a return for them, first and foremost they are car enthusiasts and long may that continue!”
Knight is also firmly of the belief that a car should be enjoyed, not just kept unappreciated in a garage. “I would say don’t bother looking into the collectors market unless you actually like the idea of ownership because they don’t do any good in the garage – they need to be enjoyed,” he reiterates. “Even putting price aside, you can buy a car for a couple of thousand and up to £10 million at auction. If someone decides they want a classic motorcar, I can give them bundles of advice but it’s up to them. We don’t need investors; they upset the equilibrium and that upsets the supply and demand. When the economy starts to look a little delicate or volatile, the investor invariably wants to sell. We want to encourage people who want to own cars for the correct reason, because you actually believe it’s a fun thing to do and you are going to get some enjoyment out of it. As long as you keep the real hobbyists and collectors in the classic motor area, you will have a much more stable and enjoyable market!”
For the collectors who form this market, there are plenty of places to enjoy the thrill of owning a classic car. “There are many choices for the enthusiasts,” Knight explains, “whether as a spectator at some of the concourses around the world or indeed as an entrant, and there are those who like going on rallies, and that’s fine. I question the wisdom of two Concours of Elegances in London, but yes, if there is a demand, then why shouldn’t there be more of them?”
Winners at this year’s Concourses included Bruce R. McCaw’s 1930 Bentley Speed-Six Gurney Nutting Sportsman Coupé, which won Best In Show at the St. James’ Concours of Elegance, while at Uniques Special Ones in St. Petersburg, Best In Show went to a1951 Alfa Romeo 6C 2500 SS Villa d’Este coupé.
In terms of auctions at Bonhams, Knight has sold everything from a Series 1 Land Rover to a 1930 Grand Prix Alfa Romeo – “that’s a particularly nice Land Rover and a particularly nice Alfa Romeo but 40 years and £5.5 million pounds apart!”
If you’re attending an auction yourself, cars with a prestigious history, such as Aston Martin, Bentley or Bugatti, or with a racing heritage, such as Ferrari or Jaguar, are seemingly the most reliable investments, and so too are more affordable machines, such as Jaguar E-types, Maseratis and earlier Lancias. As Knight himself confirms, “the market remains strong and shows no signs of going down.” Time to pull on the driving gloves and burn some rubber….