Much has been made of the performance of the classic car market over the last 12 months – some commentators believe it has out-performed gold – but the reality is that values have been growing steadily since 1998.
Certainly at the top end of the market, values have exploded, but what does this mean for the rest of the classic car market? With the growing trend in “investment vehicles” (excuse the pun), bodies such as the Historic Automobile Group International (HAGI) have applied the latest investment research techniques to analyse historical market data and have been able to give a detailed overview of the classic car market over the last three decades.
But the question that people really want the answer to is not what has happened in the past, but what will happen in the future. One of the question we are regularly asked is – “When will the bubble burst?”
Well, we don’t believe it will, but we do expect to see a slow down in the rise of market values. Our belief is driven by the answers our customers give to the following questions – Why, How, and What? Why? Prior to the last price crash in the classic car market in the mid-nineties, buyers were acquiring exotic classics as investment only purchases, to sit in their garages for sale at a later date. Dealers were guilty of driving prices up which only made the hungry investors, flush with the economic prosperity of the eighties, more excited about the values – in effect, there was a feeding frenzy.
The Wall Street stock market crash of October 1987 put paid to this, driving global economies into recession by 1990 and causing the prices of exotic classic cars to go into freefall. The Gulf War and the spike in oil prices was the nail in the coffin for classic car investment in the nineties, and the market did not pick up again until the very end of the decade. So why are they buying now? The UK classic car market is now arguably the most sophisticated in the world and one of it’s main strengths is the the UK classic car scene. The Brits have always loved their cars, and now with a buzzing classic race scene, events such as Goodwood Revival and the Silverstone Classic and a myriad of well organised owners clubs and classic tours, these cars are the key to a lifestyle as well as a wonderful piece of mechanical history. The other argument we often hear is that with interest rates so low,owner’s hard earned cash isn’t making anything sitting in a bank account – so why not spend it on something that brings some enjoyment with the added benefit that it is just as likely to produce a return as investing in the stock market. In answer to the “How”, one of the main differences between the market now and in the eighties are the funding methods. Thirty years ago, many buyers financed their purchases and when the stock markets crashed the owners needed to get out of them pretty quickly – resulting in a glut of cars on the market and sending values into freefall. It was a simple case of supply and demand. Now buyers are paying with their savings, and unlike the eighties, classic car fans are buying for reasons other than the promise of a quick profit. The supply of really good cars is limited, demand is high, and we really can’t see that changing – as we see the first green shoots of recovery in the world economy, its likely that demand will increase rather than dwindle.
With new automotive markets heating up – China, for example – the global outlook is good and this has been underlined by some amazing auction results in the US in 2012. And so to the “What?” What are people buying? Our customers are looking for quality, and that is getting increasingly hard to find. The internet has made it much easier to find cars to buy, but the perennial problem of finding “a good one” still exists. UK auctions in 2012 have revealed that punters are often buying low quality cars for top money, and some sellers have been lured into selling with the promise or belief that their car will achieve top money in today’s bouyant market and many of these cars go unsold. It’s a chicken and egg scenario – buyers are required to pay over the odds to secure desirable models that are ultimately below par. Our advice – unless you are an expert, don’t buy at auction.
The market for good cars is currently very strong; buy the right car, and at the very least you will enjoy owning it – at best you can make a good return on your investment. Buying quality is the key, and with quality much in demand, we see a healthy future for the classic car market. The key factors to identifying an appreciating classic: Production numbers – the lower, the better Looks – if it’s a looker, then it’s probably a go-er. The drive – if it drives well, it will always find a buyer Competition – cars with competition history always hold their value best. Our picks: Porsche 968 Club Sport and 924 Carrera GT – fabulous to drive, extremely low numbers Healey 100/4 – low volume, beautiful, British Ferrari Dino – the fastest appreciating car of the moment.
Where will it end? Jaguar XK120 (Aluminium bodied) – an iconic sports car and currently under valued Aston Martin DB4 – On the face of it values peaked at auction last year, but try buying one now. For more information on buying and sourcing classic vehicles, please contact Edward Legge, Ben Speak,Mark Franklin or Parry Chana for expert advice.