Classic car success entices alternative asset investors

Investors are increasingly looking beyond traditional collectibles and turning to classic cars as an alternative source of investment, according to recent research.

The study, which was conducted by classic car insurance broker Footman James, revealed that more than one fifth of the 2,000 UK adults polled are considering buying a classic car as an investment, compared to just 15 per cent considering stocks and shares, and nine per cent considering property.

The research also revealed that only eight per cent of respondents had invested in bonds since 2015, while only six per cent had invested in fine art and jewellery and four per cent had invested in stamps.

Liam Lloyd of Footman James told the Express: “The classic car market has been picking up speed in recent years, with many people moving away more traditional investments — especially in the face of rock-bottom saving rates.”

This reasoning was reflected in the Footman James survey, which found that 59 per cent of classic car owners had been influenced by the low interest rates on savings accounts when they made their purchase. More than 40 per cent also cited stock market volatility as a reason for their acquisition, while 51 per cent stated their purchase was due to a lack of trust or confidence in other investments.

According to Mr Lloyd, it’s not just middle-aged male investors who are turning to classic cars as an alternative asset investment. The research revealed that 17 per cent of women are considering purchasing a classic car, too, while almost one in six people between the aged of 25 and 34 now own a classic vehicle.

For those who do harbour an interest for investing in luxury cars, the Fiat Dino has proved to be one of the most lucrative investments since 2015. In fact, the study revealed that this vintage classic has seen its value soar by 113 per cent. Similarly, the Lamborghini Miura experienced an impressive increase in value of 62 per cent, while Peugeot 205 GTI’s saw a rise of 44 per cent.

This rapid growth has been reflected right across the luxury car market, and the Knight Frank Luxury Investment Index has revealed that luxury cars delivered returns of 161 per cent over 5 years to 31 March 2016, and an impressive 467 per cent over 10 years to the same date. According to figures from Preqin, the index’ data provider, classic cars also reported notable annual returns of 17 per cent, making them a significant force in the alternative investment market.

The increasing dominance of classic cars at auction has also made the news, with the record-breaking $35.8 million sale of a 1957 Ferrari 335 Sport setting a new precedent for collectors the world over.

“The number of cars that are being offered has risen significantly,” Dietrich Hatlapa, the founder of the Historic Automobile Group International, told the Financial Times. “We have more auction houses and more auctions. One-day auctions are now over two days, and the number of dealers has more than doubled over the past five years,” he added. “People are into originality — and that’s what they will pay a high price for."

Despite the growing prominence of classic cars within the alternative assets market, however, experts have suggested that supply is rapidly catching up with demand, which will see annual returns begin to slow compared to recent data. According to figures, luxury cars saw a growth of just 1.06 per cent between 2015 and 2016.

Echoing these figures, Fritz Kaiser, the executive chairman of wealth manager Kaiser Partner, has warned his clients to be wary of the effects of rising popularity on short-term investment value. Instead, Mr Kaiser suggests collectors add to their portfolio with a view to making returns in the long term, where classic cars continue to dominate the investment market. “If you think that you will buy a Ferrari and it will double or triple in price over the next to two or three years, I’m not sure that would be the best advice. But if you are a collector, then now is a good time to buy.”

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