Is the fast-accelerating classic car market headed for a crash?
For sale: 2001 Daimler Super V8 LWB. Well maintained. One lady owner. Special modifications.
WHEN THE Queen's personal Daimler goes on sale at Brooklands on 31 August it should attract some attention. The car, as one admiring US blogger notes, "features a number of special touches", including a centre armrest, designed to accommodate a handbag, and blue flashing strobe security lights. In the boot, you can find fittings (but not working components) for a system providing "direct contact to the Home Office and Downing Street".
The Daimler is predicted to make £25,000 to £30,000. But in the current febrile market it could go for much more. Prices of historic and classic cars have been purring along so powerfully of late that it's been a summer of broken records: a Bonhams sale at last month's Goodwood Festival of Speed grossed £36m. Highlights included John Lennon's first Ferrari (£360,000) and a 1954 Mercedes-Benz W196 racing car, which went for £19.6m – the most expensive car ever sold at auction.
Vintage cars have undeniable swank value. But they've also proved excellent investments, roaring ahead of other assets. According to Knight Frank's Luxury Index, prices have jumped 395 per cent in the 10 years to the end of 2012. And because HMRC deems classic cars to be "wasting assets", any profits you make are free of capital gains tax.
A-list marques like Aston Martin, Bentley, Bugatti and Ferrari have invariably proved the most lucrative investments - but they also require the heftiest initial outlay. The 50 cars tracked by the most authoritative independent measure of value - the Historical Automobile Group International (HAGI) Index – are worth a minimum of £100,000, with only 1,000 examples of each ever built. Still, you don't have to be a plutocrat to benefit from the rising trend. Prices of some models much further back on the starting grid have also done well.
Among the best-performers are cars from the Fifties and Sixties – most admired by nostalgic middle-aged boy-racers who still comprise the biggest chunk of buyers. That helps explain the newfound cult status of the 1963 Hillman Imp (as crashed by Norman Wisdom in /A Stitch in Time/) – despite, or perhaps because of, its reputation for poor reliability. Of the 440,000 models made, only 4,000 survive.
A good moneymaking tip, then, is to look for models capable of triggering Proustian flashbacks in today's thirtysomethings. Demand for 1976 VW Golf GTIs (the original "hot hatch") has been soaring of late. The Peugeot 205 GTI also has a growing band of aficionados. Interest has been fuelled because both manufacturers have just launched new versions of these classics – often a catalyst for renewed interest in past models. The arrival of the Jaguar F-type may well give wheels of fire to earlier E-type models. You can still pick up a decent E-type roadster for around £25,000.
Bottom-fishing investors can also find value in unloved motors. Vintage car dealer Justin Banks of Godin Banks, reckons there's mileage in 1970s Maseratis. "They're a third of the price of a Ferrari and the potential for gain is much more." The Maserati Merak is selling for £20,000 to £30,000. "It should be nearer £50,000."
Are we headed for a price crash? The market certainly hasn't been so exuberant since the last time it hit the wall in 1990 – with such force that prices of some models plummeted 40 per cent. But the consensus in the trade is that conditions now are very different, with buyers more savvy and selective than their excitable yuppie peers. And while the clampdown on bank bonuses may have some impact, there's still a lot of spare moolah out there. As Banks observes: "After you've bought your Picasso, a car is small change".
Perhaps the most bullish argument is that the factor that drove huge rises in comparable assets like wine and art has yet to hit classic cars. China's new rich aren't yet buying (partly because of import restrictions). But demand is stoking up. More than 100 years after Prince Scipione Borghese won the first epic Peking to Paris automobile race, classic car rallies and clubs are making a reappearance.
The celebrated financier Sir John Templeton famously observed that the four most dangerous words in investment are: "this time it's different". Too true. But you can't help concluding there may still be vroom in vintage motors. ·