Classic cars as an investment; return and fun

In the search for diversification within the investment portfolio, many new alternatives have been brought to the attention in recent years. This includes direct and indirect investments in art, wines, whiskeys, stamps and coins. However, it seems that investing in rare classic cars yields better returns than these other alternatives. HAGI has compiled an index in which the price developments of rare cars from before the 2nd world war to 2000 are indexed. This shows that since the start on 31-12-2008, the general index produced an average annual return of 17.1%.

The Historic Automobile Group Index

The Historic Automobile Group Index (HAGI) has been charting the development of the prices of rare classic cars since December 2008. The objective of HAGI is to improve transparency and also to promote the opportunities for investment propositions in classic cars. HAGI says it has a database with more than 1,000 members in more than 15 countries that records more than 100,000 transactions. A distinction has been made by HAGI into a number of indices:
  • HAGI Top: weighted average of the value development for all rare classic cars.
  • HAGI Top ex P&F: Weighted average for rare classic cars excluding Porsche and Ferrari.
  • HAGI MBCI: Weighted average for rare classic Mercedes-Benz.
  • HAGI F: Weighted average for rare classic Ferraris.
  • HAGI P: Weighted average for rare classic Porsches.

The return on rare classic cars

As of December 2013, the returns of the indices are excellent compared to the S&P Global 1200 index. What can be called a good indicator of global returns on shares, since it comprises around 70% of the global market capitalization. These returns show that an investment in rare Ferraris yields the highest return, while the return for rare Porsches is slightly lower. For Dutch investors, investing in rare classic cars would be a great opportunity to beat the (Dutch) index.
IndexValueNov. return 2013Return 2013 (up to and including Nov)Average annual return
HAGI Top *217,815,40%35,99%17,1%
HAGI P *203,270,58%20,19%15,5%
HAGI F *229,7613,37%50,39%18,4%
HAGI Top ex. P & F *215,150,53%30,69%16,8%
HAGI Top MBCI **135,71-3,37%21,55%17,2%
S&P Global 1200 *1813,551,61%20,56%12,9%
AEX *396,551,18%15,71%8,5%
* The index has been around since 31-12-2008 and started at £ 100
** Index has been around since 31-12-2011 and started at £ 100

Make money yourself from classic cars

It is important to know with the HAGI Index that it is composed of 50 types of cars, a relatively limited number. In addition, the cars in the index are worth at least Ђ 120,000 at the auctions in which they participate and have a maximum circulation of 1,000. In addition to brands with their own sub-index, the index may also include Aston Martin, Bentley or Bugatti.
Most investors will not have the option to purchase the rare classic cars in the index. If the investor with insufficient capital is looking for an interesting investment in a classic car, there are first of all a number of circumstances that can have a major impact on the value development of classic cars:
  • The introduction of popular new models that will flourish interest in the classic models of a brand;
  • A milestone in the age of the type of car; for example, the Ford Mustang 2014 model was introduced 50 years after the introduction of the first Ford Mustang. This has led to extra media attention and a renewed interest in the classic Mustangs;
  • The use of classic cars in films, media releases or films can also influence the interest in a classic car.

Keeping the above factors in mind for classic cars is therefore advisable for those interested in purchasing a classic car as an investment. With this the timing for the purchase can be adjusted. What should also be taken into account in the purchasing process:
  • Good due diligence of the type of car for which there is interest before viewing. Here, for example, the strengths and weaknesses of the classic car type must be identified. When viewing, specific attention should be paid to these points.
  • Buy a classic car to your own taste, if the value development stagnates then this is less annoying.
  • Buy a car for the right price. The chance of a bargain at an auction with connoisseurs is of course less than when buying privately, for example from a private person via the internet.
  • Pay particular attention to a number of things when purchasing a classic car as an investment, this can make the difference in value development. Note, for example, a less common type of engine, rare options, whether the car has not been involved in an accident, and if there has been a restoration or whether it has been carried out professionally. In short, buy a car in its original condition, this is only 1 time!
  • Do not save on advice, try to involve a specialist or someone with knowledge of classic cars in the process. This way you get a second opinion about the chances for a certain type of car as an investment. This is certainly important when purchasing the car from a private individual.

In conclusion

When investing in classic cars, it is therefore above all important to carry out proper due diligence before purchasing. Impulsivity is a danger when going through this process. Preferably make sure that the classic car as an investment is as original as possible and you may need someone who can confirm originality. When the conditions as described are met, you are ready to drive around in your own investment!

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