I was watching the Discovery Channel’s coverage of the Barrett Jackson classic car auction from Scottsdale Arizona the other week, and the vast volume of cars going through the auction got me thinking about the popularity of this sector. One of several big players in the US auction market, they hold 4 auctions a year across America, each lasting for around a week. This equates to the sale of over 7,200 cars a year, most of which are sold with “no reserve”. Attendance at these auctions isn’t restricted to your stereotypical classic car anoraks either, this year attracted celebrities in Justin Bieber, Steven Tyler and Burt Reynolds.

Okay, this was an American auction and you would expect an element of OTT, but how does this enthusiasm for collector and classic cars translate over to the UK? The answer is very well. Crowds flock in their thousands to Goodwood’s Revival and Festival of Speed to celebrate cars of yester-year, not to mention the plethora of car shows taking place on any given weekend around the UK during the summer months.

When people mention classic or collector cars, people immediately think of either pre-war cars or “well-established” classic cars such as Jaguar E-type’s, Jensen Interceptor’s, Austin Healey 3000’s or Lotus Elan’s. However, that is not necessarily always the case.

Collector cars are a generational thing. More often than not the enthusiasts of these cars will put on the rose tinted spectacles and buy the aspirational cars of their youth. For the baby boomer generation this would be the well-established classics mentioned above. For 90’s kids such as myself this may be Escort RS Cosworth’s, Lancia Delta Integrale’s, or TVR Cerbera’s. How long before this moves on a generation and we see a collector car market emerging for pioneering electric cars like the current model Tesla’s – could this even stretch to the Nissan Leaf or the G-Wizz? Surely not…

That said, even now we are seeing relatively contemporary models fall into the collector car bracket. For these cars, limited numbers is key. In 2016, RM Sotheby’s sold a 1995 Porsche 993 GT2 for £1.8m. This represents a return of over 800% on the original cost. This isn’t just restricted to “pie in the sky” cars either. Relatively attainable contemporary limited production BMW’s such as the E46 generation M3 CSL and the Z3 M Coupes have also seen values skyrocket in the last 5 years.

At a time when the interest base rates are 0.25% and with the inherent uncertainties in financial markets at the moment, why not invest in cars? Classified as wasting assets, any capital appreciation in classic cars is exempt for capital gains tax purposes. What are the downsides to ownership? At worst, you would get the enjoyment of a special interest car for a few years; at best you get the latter and a decent return on your investment. Like any investment, of course there are pitfalls, but the sector popularity, if nothing else, is understandable.

David Samborek
0141 886 6644
david.samborek@campbelldallas.co.uk

 

The information in this blog should not be regarded as financial advice.  This is based on our understanding in February 2017.

Image: Sergey Kohl/Shutterstock, Inc.