Words by Raj Hunjan
Over the last decade cars like the 60’s Ferrari 250 GTO and 90’s McLaren F1 have increased in value by millions of pounds. The value of a 250 GTO back in 2003 was estimated at around £6 million. In October 2013 a 1963 250 GTO changed hands for £32 million. This is an astronomical sale price when you compare it to the $18,500 it was sold for when it was new in 1963 (£85,000 in today’s money). Likewise a McLaren F1 sold in August 2013 for over £5 million, multiples of its original £540,000 price back in 1995. It is true that both are ultra rare, the 250 GTO is one of 39 in total and the F1 is one of 64 road cars, however it’s not just these exclusive cars that are seeing massive gains in value.
Other sports cars that have seen substantial increases in their value over the last ten years include:
• BMW M3 E30 (£20,000)
• Porsche 911 RS 964 (£80,000)
• Ferrari Dino 246 GT (£200,000)
• Aston Martin DB5 (£350,000)
• Mercedes 300SL Gullwing (£1,000,000)
The approximate January 2014 prices are shown in brackets. All of the above cars have seen price increases in excess of 100% over the last five years alone.
What is driving this increase in value of the greatest sportscar icons? There are several major factors that are causing these price increases. Firstly, there is a finite supply of the most iconic historic cars which coupled with the below leads to price increases:
• Aspiring owners that have dreamed of owning these iconic cars for a long time are now able to buy these cars.
• Greater awareness of classic cars globally has led to more demand from emerging economies.
• Financial difficulties across the world over the last five years have led wealthy individuals to reassess what they view as assets and many have started acquiring alternatives like classic cars, which they can also enjoy regardless of how much they are worth.
This appreciation in values of some of the best sports cars led to several investment funds appearing, which were designed to give financial investors exposure to this trend. One of the funds that set up in September 2012 is The Classic Car Fund, which is a Swiss managed fund legally domiciled in St Vincent and Grenadines. The minimum amount you can invest in the fund is €10,000. The fund is valued every three months and is subject to; a 5% subscription charge, annual 2% management fee and 3 year lock in period before you can withdraw any funds you have invested.
These charges and restrictions may put off many investors. Also due to the nature of the assets, cars in long term storage, it does not generate regular income in the way that company shares, government bonds and property do. The value of the cars held by these investment funds can also be extremely subjective, as they are particularly rare and unique cars and their value may be based on their race history and provenance which is difficult to accurately price. This can lead to difficulty in finding the true value of the investment fund until the cars are actually sold and the proceeds received.
The very existence of classic car investment funds clearly demonstrates that classic cars can indeed be viewed as an alternative asset to more traditional investments. It is possible to invest in classic cars directly, by buying the cars yourself and either storing in your own garage or at a storage specialist. Investing in cars directly is the route that many people choose and one that can have big advantages over the fund route:
Ferrari-Dino-246-GT-1969-1974-Investment• No minimum investment amount and there are cars for all budgets
• You won’t have to pay management fees, but obviously you are
responsible for other ongoing costs like insurance and maintenance
• You will directly own the car(s) so you are able to enjoy them
• You will have full control of the sale and purchase of car(s)
And finally, any capital gains from the eventual sale of your cars would not be subject to tax in the UK, unlike a classic car investment fund.