Classic Cars: New Gold Rush For Investors?

By Author: Thaddeus Reitz
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Are Classic cars the brand new Gold rush for investors? Consider a couple of examples of classic cars that have done perfectly. A Ferrari 250 GTO initially built for British racing legend Sir Stirling Moss sold for a record $35m (£22.7m) in 2012. A decade earlier this classic car was purchased for a mere $8.5m. A McLaren F1 has gone for more than $3.5m and costs for $1m-plus cars are accelerating fast, as they become more accessible. The classic vehicle marketplace is in the throws of yet another boom, as well as its definitely not just the super-rich that can benefit.

According to an index of classic cars compiled by Historic Vehicle Group International (HAGI), valuations rocketed by 19 per cent in the first nine months of 2012 as well as by more than 25 per cent over the previous year. Since 1980, HAGI's index of collectible Ferrari's has grown on average more than 15 per cent every year. Tangible assets like art, wine, stamps, coins as well as antiques have always been an choice for investors looking for diversification. They've been especially popular whenever world economies hit the buffers, very now with inflation ...
... wiping out returns on bank deposits as well as volatile stock markets proving bad, both for the heart and the wallet. With the current Gold rush over, where can you invest your difficult earned cash? Time to possibly think about the classic car investment market. That has a proven track record for performance, and generating profits during the past decade. Even at the toughest time of this last world recession, the markets had been still very buoyant and defied the recession by making large returns for investors.

Over $260m value of classic cars sold at this many years Pebble Beach Concours d'Elegance in Monterey, California, and another sale held by RM in Battersea in October took more than £14m in a great night. In fact, major auction houses sold cars value $610m in the year to 31 July, based on the latest Classic Car Auction Yearbook published by Historica Selecta up 20 per cent on 2011. Eight years ago, it was simply $141m. Average prices have jumped by 15 per cent, too, and 94 cars sold for more than $1m, twice as many as 2 many years ago. In reality, the numbers are much higher because less than a 3rd of sales go through auction rooms, and there's no requirement to report details of private sales.

There's a lot of fuel in the Classic Cars tank:

"Buying a beautiful classic car above $1m is a great investment as there is only one method the value is going!! There's unlikely to be any kind of shortage of customers, at least as extended as interest rates remains so stable at record lows. Most high end classic cars like your Ferrari's and Aston Martins end up in the established markets of Europe and America, however there's growing interest from China, India, and from the oil-rich Middle East where there's a long tradition of having vintage vehicles", said Sarah Collins Owner Prestige Car Finders.

If you do too, however don't have a few million dollars to spare, there is another route. A number of money have been set up in the past few many years specifically to invest in classic cars. You definitely won t discover them listed in the Financial Times as well as their track record thus far isn't great, however it's worth hunting at just what s on provide. Here's two classic vehicle investment money that tend to be hoping to create a business module that investors will actually make money from a classic car fund!

Aston Martin DB5

The Classic Car Fund (TCCF) pulled up within weeks of IGA going public. Run by Italian fund manager Filippo Pignatti Morano di Custoza, it has offices in Liechtenstein and Switzerland, but is dependent in St. Vincent. Initially, it set a minimum subscription of simply €100 (£80.97) as well as listed in Hamburg, however it all went quiet. Now, it's back as an unlisted private fund and asking for investments of at least $10,000.

The reorganized fund, established in September, wants to raise €3m in its first year. It's running simply behind its three-month target, but is in talks with a large German bank and targeting other people there and over the border in Switzerland. A spokesperson says they'll purchase at least 2 cars "soon and predicts dazzling returns of 10-15 per cent a year.

Family Classic Cars Fund (FCCF) is the creation of Paul Charles, based in San Juan Capistrano, California, and with a minimum investment of $10,000 (£6,196.31) hopes to put together a $120m pot. "The response thus far has been really great," says Mr Charles. "Most of the interest has come from the You and some in Europe." Americans must be accredited investors - worth more than $1m or perhaps earning more than $200,000 a year - however you living outside the You is greeting. If any of these money can get the model to work, no doubt other people will follow.

So Precisely why Prestige Isn't a Fan of Funds:

Our biggest concern is investors have little understanding of the marketplace and its nuances, and that classic cars should be purchased for love, certainly not simply financial gain. Cars don't produce income, so the only method to profit is through capital appreciation more than a long period of time. It could be a bad investment as easily as a good one and the dead costs - subscription fees, insurance, maintenance and storage - will eat into any kind of income.

That makes it hard for a fund to produce year-on-year results. TCCF, for instance, was ready to use as much as 3 per cent of the funds kitty simply to pay commission to introducing agents, or fixers. As well as a 5 per cent subscription fee. FCCF also charges an administration fee of more than $13,000 a year and storage fees on top of that.

Both TCCF and FCCF charge an annual management fee of 2 per cent and will take 20 per cent of the income if the money net asset value exceeds a high watermark, typically its previous peak. That's more in keeping with fee structures adopted by the hedge fund industry, and back-end loaded fees like that shouldn't present a problem as extended as the market keeps increasing.

What we find a lot more concerning is the valuations placed on each classic car held within the money. Simply how do you get an accurate web asset value (NAV)? Unlike the price of a share, or more traditional fund, valuing a classic vehicle is trickier. No two are the same and there's the issue of liquidity. Cars have no guaranteed buyer and regarding 30 per cent of those taken to auction go unsold. On the flip side, it is difficult for experts to predict exactly what a private sale might make, which risks undervaluing the fund.

The reason why Not: Drive it Your self

If you have the knowledge, or are ready to do a couple homework, purchasing your car may be a much better method to play this investment theme. It's more fun, too. "If you understand your onions you d do it yourself," an old-hand tells me. "The reason why pay someone else to do it?" You ll need a large garage, of course, and there'll be insurance, maintenance as well as other costs to pay, however the benefits of investing directly go method beyond the financial.

"If you re interested in cars, but understand absolutely nothing about them, as well as think you d like to discover as well as kick a couple tyres then have fun in having something," states Sarah Collins. "As well as, of course, there's the benefit of having a vehicle in the garage that dinner guests will like to sit in and hear to the roar of that fantastic V12 engine!. Buying a classic car is all about the passion as well as love for that certain classic vehicle, Without passion, itMercedes Gullwing 300SL becomes a liability" On the and side if you make a profit, it'll be free of capital gains tax. "They are classified as a wasting asset, one that has a predictable life certainly not longer than 50 years," explains Danny Cox at Hargreaves Lansdown. "Classic vehicle funds, meanwhile, is topic to taxes on income and gains."

If you ve got the passion as well as the cash, just what if you purchase? This really is a tricky one, its about finding the happy balance between the passion as well as that classic car will make a good investment for you, that will turn into income a few many years from now. "It's all about desirability, sports car pedigree as well as good solid technology," claims Sarah Collins. "A good investment-level Ferrari will set you back at least $100,000 and returns will probably be greater and come more fast at the higher end of the market."

"15%: yearly increase in valuations of collectible Ferrari's since 1980″

But the direct route doesn't have to be an expensive one. You can still choose up an iconic Jaguar E-Type series 1 coupe for about $50,000. Jaguar made thousands of them and its still a liquid marketplace. There are lots of experts as well as spare parts, too. The 1960s Mercedes 230SL is another head turner and costs about the same. For yet another $25,000 you can drive away a good E-Type roadster. Cars from the seventies tend to be a small less fashionable, however Maseratis are value looking at. "They're a 3rd of the cost of a Ferrari as well as the potential for gain is a lot more. In my opinion, they were much better searching, too," claims Ms Collins. "The Maserati Merak is marketing for $20-30,000; it should be nearer $50,000."

Exactly what Now?

You ve need to find the classic vehicle of your dreams, what do you need to do now? Try to adhere to Prestige's Check List, this list is designed to help you avoid the basic errors from buying a classic or perhaps rare car:
Prestige's Check List:
â–  Be ready to tie up your own cash for 3-5 many years.
â–  Have passion. Without having it, classic cars can become a liability.
â–  Buy beauty, however don't fall in love with the poor cousin.
â–  Buy your dream vehicle. Even if the world goes to pot tomorrow, you ll nevertheless have that.
â–  Acquire knowledge - check auction results and trawl the Internet.
â–  Start a relationship with a friendly dealer, or perhaps contact Prestige to help you find your classic vehicle.
â–  Know the vehicle s history - is it in original condition or has it been restored? Peel back the carpets and check for rust.

Learn more about classic cars at http://prestigecarfinders.com/classic-car-investors