Buying a car is a waste of money
– not the right car!
Remember your parents trying to talk you out of buying car? They just saw an oily mess that will cost money, you saw freedom. Perspective is an interesting thing. That old Corolla you bought may have been a bucket of bolts but it gave you freedom, a sense of ownership and pride.
Imagine what your parents would say if you tipped 300,000 UK Pounds into a 1959 Mercedes Gullwing in 2007? Firstly they would ask where you got the money and then they would think you were mad, but were you?
In 2007 you could have bought F1 owner Bernie Ecclestone’s gorgeous 300SL Gullwing for the aforementioned 300,000 pounds, fast forward to 2017 and the same car is now worth more than 1.2 million Pounds, ten years and 300% profit. Not too many assets can stack up against that.
Property agency Knight Frank – which tracks the value of nine collectible assets from antique furniture to wine and jewellery – recently revealed the car market was the top one to invest in. With values up 28% over the past 12 months, 115% over five years and a staggering 467% in the last ten years to 2016.
We are not suggesting that this forms an anchor of your financial planning strategy but if you are at a stage in life when you can enjoy collecting you may as well reap the rewards.
The holy grail of collectors cars is the 250 GTO, one of the most superb sports racing cars ever built. Not only does this car look incredible it also performs. Powered by Ferrari’s iconic V12, just 39 of these extraordinary cars were produced. The GTO’s performance is not limited to the track, as an investment it is nothing short of stirling.
In 2015 a GTO sold for $52 million, yes that is $52,000,000 and that is in USD. The same car 13 years earlier could have been bought for around $3 million USD. In one year the prices of these cars doubled.
In general, classic cars have been on the rise but that does not apply to all of them. You could buy yourself a 1927 Model T Ford Open Roadster right now for $27,000 AUD. That same car 20 years ago was the same price.
Investing – and let’s face it you should never really speculate in this type of market – in any perception driven market relies on many things to drive it. Firstly it is generational, the guys buying Phase 3 GTO’s for $200,000 plus are the guys who were kids in the car’s hey day. They emotionally connect with the car’s story and that era.
In 2002 Christie’s Auctioneers sold what was then the ultimate in collectors cars, A Type 41 Bugatti Royale for a world record $10 million USD, and as mentioned at the same time you could have bought GTO for $3M USD. The price of both cars was and is driven by the emotional connection the buyer has to the car, and with any generational object this will change. Whats a Royale worth now? Hard to say there hasn’t been one on the open market since 2003, at auction today? $30 million USD maybe, but nowhere near the GTO. Only time will tell.
Car collecting can be rewarding, and even more rewarding if your timing is right, but the holding costs are high, you will receive nil ongoing income, and you need someone to service such exotic beasts. Oh but to sit behind the wheel of a legend is probably worth it!
This article is about collecting and the odd markets that pop up, if you are serious about investing in more calculated markets talking to one of your financial planners today.