Over the past decade, collectable cars have been a very profitable investment. In 2017, the Knight Frank Luxury Investment Index revealed that while assets like wine, watches and coins offered investors returns of between 3% and 10% over 12 months, cars had produced incredible returns of 28% over the same period. Unsurprisingly, this has led many to view collectable cars as a potentially clever investment rather than merely a wealthy indulgence. This change in attitude was confirmed in 2018, when German banks began advising their clients to consider purchasing classic cars as an investment.
“in any collectable market, scarcity drives value”
The raises an interesting question – if you are buying a vehicle as an investment, is it better to opt for classic cars or modern supercars? Up until very recently, the conventional wisdom among investors was that classic cars make better investments than supercars. The argument is that in any collectable market, scarcity drives value. As there is a finite number of well preserved classic cars in existence, values will continue to increase if demand does not fall.
Indeed, many of the most expensive vehicles ever sold are classic cars. As ever, Ferrari tends to lead the field in terms of price here: the most expensive car ever sold is believed to be a 1963 Ferrari GTO which cost a staggering $70 million in a private sale. The previous highest price was also for a Ferrari GTO, regarded as the holy grail in the car collecting community due to its rarity and beauty, which was sold for $52 million in 2013.
“the conventional wisdom is beginning to be challenged”
However, recently the conventional wisdom is beginning to be challenged due to two interesting trends. The first trend is that after years of stellar growth, the market for classic cars could be starting to level off. JBR Capital CEO Shalom Benaim contends that although extremely rare classics still command high prices, the average prices in the classic car market may have “plateaued”. This trend is also in evidence at big car shows, such as the Amelia Island Concours d’Elegance in Florida. Overall sales have decreased at the event in recent years from $140m in 2016, to $121.3m in 2017, and $80.5m in 2018.
The second trend is that the values of rare hypercars have skyrocketed recently. The Ferrari F12tdf, for example, had a production run of just 799 vehicles and an initial list price of $450,000. Just 8 months later, a well optioned F12tdf fetched a staggering $1,550,000 in a private sale, representing a growth in value of 200%. Similarly, the LaFerrari, which had a production run of 499 and an initial list price of around $1.5 million, now commands a market price of $3 million. Writing in Top Gear Magazine, Max Girardo of RM Sotheby’s Europe argues that “almost any limited-production hypercar” is a good investment.
Top Gear’s James May puts the LaFerrari through its paces. Of course, all this does not mean that you cannot make money by investing in certain classic cars. Bloomberg’s Hannah Elliot contends that despite softening in the classic car market, “people will pay plenty of money for the “right” thing—not necessarily the biggest or the most-hyped.” However, there are many more factors to consider when investing in classics, such as proof of providence, maintenance and ownership history, all of which are less onerous with newer supercars. Thus, if you can gain access to them, the smart money might be on limited edition supercars right now.