By Guy Jenner
We are occasionally approached about picking a car for investment. You may fully understand this sentiment or be completely against the idea. Regardless, cars are a nimble asset that can be used and enjoyed whilst not attracting capital gains tax should you be lucky enough to experience appreciation. If you have a passion for cars, it is understandable why investing in something you love over other assets or financial instruments holds an attraction.
Now we are not providers of financial advice. We might even provide a health warning to say that cars should not be considered an investment. Any appreciation should be considered a lucky, unforeseen upside.
That doesn’t stop buyers trying to pre-guess the market. Picking a winner can be altogether more challenging. There is a saying in automotive that goes; “what sells well new, sells well used”. When it comes to classics and collectables that really isn’t the case.
To pick a couple of cars that highlight the point, I will start with the Aston Martin DB4GT Zagato. Now considered to be one of the most desirable cars in the world. Back in the early 1960’s it was a tricky sell. There is a good reason why only 19 were made. Very few were prepared to buy one. They were extremely expensive and were being beaten consistently on track by the Ferrari 250 GTO.
As it happens, we had first hand involvement in this challenge. Mike Harting who lead HWM from 1958 until he passed away 2021 happened to do a deal with Aston Martin to buy the last 3 DB4 GT Zagato’s ever made in 1963.He had seen them sitting around at the factory and took the brave step of acquiring them to sell at HWM. After publishing a great advert in Autocar (a copy still hangs in our office), they sold for less than £6,000 each and would have been worth considerably less 12 months later. As I am sure you know, a DB4GT Zagato is now worth over £10m.Nobody would have predicted that in the mid-1960’s.
Straying away from Aston Martin for a moment, another great car that struggled when new was the McLaren F1, designed by Gordon Murray. This master piece of engineering was specified to a point where the price tag was simply beyond what the market wanted to pay in 1992 at £540,000.As a consequence, in the first few years, the resale market was extremely weak with reports of one changing hands for £200k less than list in the first few years following release. Again, values now are also well over the £10m.
We sometimes see the opposite scenario. A good example of this is the Porsche 911R.A purist form of 911 that the market quickly warmed to. The list price was £140k plus options. Early cars changed hands at £500,000.Today the market is a good £150k less than peak. It is difficult to know what values will do from here but the early rally was not a spring board for continued, relentless growth. It is a wonderful car so maybe the market will firm up again in years to come.
There are of course so many other examples of different depreciation and appreciation curves for classic and collectable cars over the years. Naturally, another very important factor that is assisting the market has been a sustained period of low interest rates. Investors therefore look for other places to put capital and owning desirable assets is one such place. The car market has got hot and cooled off many times over the last three decades. Taking a long-term view of ownership is really the best way to make it work.
So what this tells us is that it is very difficult to pick a winner. Should you consider buying a car as somewhere to park capital, it normally pays to think long term. Therefore, what is most critical, is that you purchase something that you truly love. If it is a car that you are going to keep a long time, you have to desperately want it in your garage. This also tends to be a good strategy overall. If it is a car you adore, chances are, there will be many out there that feel the same.
If you want some frank advice, feel free to call our team to talk things over. It should be pointed out that we can only give opinions rather than solid facts on future values. The reality is, many are good at talking about where future values are going but nobody really knows. If we did, we would still own those 3 DB4GT Zagatos that we sold in 1963!