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Hot! A Classic Investment: Classic Cars

Fancy owning a garage full of exquisite profit? We look at classic car investment

Bonhams smashed world record prices for both a Bentley and a Rolls Royce at a recent sale at Goodwood, which realised a staggering £22 million in just a few hours.

Coming in at a colossal £5 million, the ‘Birkin’ Bentley at became the most expensive British car ever sold at auction, and ‘The Corgi’ Rolls-Royce broke records too by fetching £4.7 million.

However, although the classic car market is currently very strong, Bonhams’ Motoring Department International Managing Director James Knight still urges caution to those considering classics as a sure fire way of making a profit.

He explains the market is prone to fluctuate – cooling in the late 80’s and  early 90’s, and it takes serious skill in choosing the right vehicles to buy, and a rare luck of timing to often even recoup purchase and restoration funds. Not maybe a prudent investment choice for the enthusiastic amateur – regardless of their passion for cars.

The collectors’ motor car market is witnessing value and volume growth at levels not seen since the late 1980s. But, whereas the market cooled in the early 1990s, costing many investors dear, Knight does not predict a similar fate now.

“Today’s dynamics are very different from those in the late 1980s and early ‘90s. One can draw comparisons with the housing market rise and increasing interest rates, most interesting motor cars sold today are acquired with liquid funds, not borrowed money as was the case in the ‘80s/’90s boom then bust period. People then were buying cars with borrowed money they soon found they could not afford, and it burned them.”

It is this specific aspect that encourages Knight to believe that when the market adjusts – as it surely will – it will this time provide a soft landing, unlike the early 1990s.

Knight continues, “In the early 1990s the whole supply and demand equation  went out of kilter – perceived value inflation brought too much product onto  the market, offered with very few buyers. This suddenly accelerated the downward trend. We suddenly had finance houses wanting to sell re-possessed cars. Even when we advised the price would be much lower than the outstanding debt, they still insisted we sold the car just to clear their books.

The interest rate spike of 16-17% in the UK also played havoc with private sector mortgage repayments resulting in some collectors having to sell their cars just to keep the roof over their heads.

Today, although interest rates have risen, they are still bearable in the UK. I am aware of the housing market downturn in the USA and the ‘credit crunch’ that has impacted across the world. But I still feel it is not as much an issue today, simply because so many people have bought with saved money – not borrowings.”

“I predict, going forward, that when demand softens – and not necessarily prices – we’ll see less volume coming to market. This should maintain the supply/demand equation at satisfactory levels thus keeping values steady. “

A classic Rolls Royce in superb condition, out on the road

We talked with Tim Schofield, Director of the Bonhams’ Motor Car Department on car choice and any additional points to consider.

Choosing the right car isn’t as easy as just opting for the obvious luxury marques: “Certain manufacturers, certain periods and types, and certain provenance of cars have performed very well. Exclusive and luxurious marques such as Ferrari and Aston Martin and sports racing cars from the 1950s are also in demand, and any car that can be regarded as a prime example is also coveted. By prime example I mean a motor car that’s superbly restored or has tremendous history.”

“Another sector of the market that has performed well is veteran / Edwardian motor cars (dawn of motoring up to 1919), especially those cars eligible for the annual and prestigious London to Brighton veteran car run, which is open to cars manufactured pre-1905.”

“It’s also not as simple as saying the top end of the market is doing very well and the lower end of the market isn’t doing well. A compromised Ferrari is a difficult car to sell, whereas a superbly restored Austin Healey will pleasantly surprise when offered for sale.” should you need to replace any through driving damage, wear and tear.

Schofield adds “What is an anomaly is that to sell well some models, marques or types need to be as original a specification as possible (e.g. Ferraris with their Classiche certification need to be stock standard as they left the factory), whereas – for example – a UK Aston Martin buyer is very happy to pay a premium for an up-rated, enhanced or modified DB4, 5 or 6, over and above the standard, as-left-the-factory example.”

As to a winning formula for investment success, Schofield says “If there were an easy answer to this question I wouldn’t be in this business. There is no formula to making money out of classic cars. There are plenty of dealers out there who are successful, but also plenty who are struggling – and they do it for a living.”

“People should view collecting as a hobby, and if they end up making some  money out of it then that’s a great bonus. There is not a good or bad time to sell either. Rather, it’s a case of selling when you want to or need to.”

In terms of whether to build a portfolio of classics yourself, or join one of the car investment groups Schofield concludes “It is hard for me to see the fun in having a share in something but not being able to use it. The attraction in collecting motor cars lies in everything that comes with owning them: driving them, being seen in them, polishing them, posing with  them, racing them, and even just having them in the garage. We always advise when buying a car, that you buy with your heart – because it may be an investment you have to live with for some time.”

Bonham has upcoming sales at The National Motor Museum in Beaulieu on 8 September, and at Goodwood Revival in Chichester on 15 September, plus others later in the year.

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