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Investing in cars: fuel for thought

22 June 2017

Marcela Kunova and Karen Jones

Porsche 918 Spyder

Classic and new edition cars, according to the latest Knight Frank Luxury Investment report, have taken a knock and been outperformed in investment terms by wine in the last year. But before you take to the drink, founder of the Historic Automobile Group International, Dietrich Hatlapa says price tags for classic cars are still impressive and hold at Euro 1-2million for specific cars like a 1993 Porsche 911 Carrera RSR. He adds that auction prices which command media attention, only account for twenty five percent of the market. No need to drown your sorrows just yet. 

Need for speed 

Money though is just one consideration in what is a hard-wired passion investment fuelled with a legacy of James Bond glamour. Celebs and car enthusiasts across the world just can’t stop at one. So, we wondered how do high end collectors choose their supercars? Is it, ‘want’ or do investment considerations make a difference now?  “Everyone has their own plan for their collections,” says Simon Sproule, vice president of Aston Martin. “Some decide to go very deep on just one brand and often, just one-time period, for example, only collecting pre-war Lagondas or Aston Martins that have raced. Whereas fifteen years ago, in general the collector market was focused on historic cars, today’s collectors are much broader and seeking to collect both historical cars and new collectables like the Aston Martin Vulcan or Vanquish Zagato.” He says though that price increases have fundamentally changed the collector car market. “It is hard to ignore that cars have been one of the top asset classes for appreciation over the last ten to fifteen years.”

Heart not head

James Haithwaite is a client services director and a classic car specialist at First Names Group and he says: “Whilst this is true, identifying the cars most likely to perform best as ‘classics’ in the future is proving more difficult now, although the key factors to help determine a car’s future success are rarity, originality, provenance, pedigree and usability. However, I really think a classic car should be bought primarily because the prospective owner likes the car. If other people share their appreciation, then they can also enjoy a handsome return.”

Marketing machines

Haithwaite goes on to say that some manufacturers produce specific cars in small numbers and then invite selected customers to purchase them, like, the Ferrari LaFerrari or F12 TDF, Porsche 918 or 911R, McLaren P1 and Jaguar F Type Project 7, to name but a few. “These have all immediately appreciated upon delivery,” says Haithwaite, “Owing to the finite numbers produced and, above all, their marketing programmes which push interest and demand making cars sell for two or three times over list price. Anyone who manages to buy one of these cars at list price has done well,” He adds, Although I suspect those who’ve paid substantially over list won’t enjoy the same level of return in the future as prices can recede over time.”

Rule no. 1 never lose money

Claire Usher-Wilson, director at Summit Trust International, who specialise in holding assets in trust structures, says that keeping a collection whole for tax purposes, can add value. “From a UK tax perspective,” says Usher-Wilson, “the good news is that cars have been considered as ‘wasting assets’ and therefore are not taxable on capital gains.” This is still true, despite the classic car market offering a good return on investment in the last decade. “There is an added benefit of confidentiality for collectors who wish to keep their names out of the public domain,” adds Usher-Wilson.

Usher-Wilson explains a caveat to avoid any car crashes, “When assets are in a trust structure, the ultimate control needs to stay in the hands of the trustees, if the principal UHNWi is deemed to be controlling the assets, the original intention of the structure is likely to fail and with it will come tax queries and potentially even more serious brand reputational consequences for the trust service provider in an elite sector of super car collectors.” 

 

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