Asia Tatler: Driving It Home

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Classic cars are not only sexier than stocks and shares, they’re the ultimate high performance investment.

On August 14 this year, in a marquee on a golf course in Monterey California, the crème de la crème of auto enthusiasts gathered from around the world to witness the sale of a scarlet 1962 Ferrari 250 GTO Berlinetta, one of only 39 ever built. For a couple of decades the GTO (which had an original sticker price of US$18,000) has been the holy grail of multi-millionaire car collectors such as Ralph Lauren, Pink Floyd’s Nick Mason, and Wal-Mart heir Rob Walton and, as examples so rarely make an appearance on the market, the excitement and anticipation in the room was fizzing. Robert Brooks, of Bonhams, started taking bids in US$1 million increments. At US$34m it started to slow, the auctioneer taking US$100,000 from one paddle gesture, then another. “When is the next time a GTO will be at auction and will the next one be any less?” he asked as he scanned faces of the crowd. Eventually, the hammer came down at US$38,115,000. That’s a record for a classic car at auction. “A fantastic car at a great price,” one expert exclaimed, for another GTO passed through private hands not long ago for US$52 million.

 

That’s a lot of money for 880kg of hand-beaten metal, a 300bhp V12 and some lovingly restored leather. Imagine your horror if it got a stone chip! That is maybe, but rest assured because this – or indeed another Ferrari, Bugatti, Porsche, or Mercedes-Benz – should be a safer investment than stocks, gold or bricks and mortar.

 

One is used to other toys like private planes and motor yachts being a drain on resources, but vintage cars are different. For the biggest return, bet on red. For the year ended July 2014 the cost of top-end classic Ferraris rose 33.6% in a single year compared to last year’s startling 55% rise, Porsche 18.5% and Mercedes a more sober 3.79% according to the Historic Automobile Group, which tracks and publishes prices.

 

The ‘Top 50’ classics rose 25.2%. That compares to a rise of 4.65% for the FTSE-100 index of leading shares and a 5% slump in the price of gold during the same period. Measured over 10 years the performance of automobiles is even more stunning, with their value up by over 500% compared with 55% for the FTSE and 240% for gold – the latter always regarded as a safe haven in turbulent financial times.

 

As such, a number of private equity firms have been established in recent years to invest specifically in these marques. PHD Equity Partners, for example, have launched a fund alongside auctioneers H&H Classics acquiring cars worth over US$500,000, and investors are allowed to share the cars at glamorous automotive events and driving days. The minimum investment is US$85,000.

 

It’s big business. In 2011 a leading specialist, RM Auctions, sold 200 cars over £1 million. In the last 12 months they have doubled that figure.

 

While Ferraris from the 1950s, 60s and 70s are outside the grasp of most, there are plenty of other models at more down-to-earth prices. A mass-produced E-Type Jaguar is never going to accelerate as fast or high, financially, as a one-of-a-kind Bugatti, but prices are going up steadily nonetheless. Stocks and shares can become worthless overnight, but a tangible asset is always worth something. What’s more, the market is less volatile than, say, property.

 

And then there’s the fun factor. Few things are more beautiful than the curves of a Pininfarina bonnet, or bring a broader smile than hearing the bark of an uncensored V8 as you barrel along a winding road. When you got your first paycheck, did you lust after Standard Chartered stock? Of course not. You dreamed of when you’d eventually be able to get behind the wheel of a Maserati. Classic car ownership allows you to live out your dreams and make a mint while doing it.

 

Alain Li, the Hong Kong-based Asia Pacific CEO of Richemont, bought his first classic soon after he started his first job in London. It was an Alfa Romeo Duetto Spider. Now his collection includes a 1955 Mercedes 300SL, a brace of iconic Jaguars and five significant Ferraris from the 1970s and 80s. “I have never bought a car as an investment, explains the gentleman racer. “However, I’ve been fortunate that in the last few years the value of the cars has risen and more than paid for their upkeep.”

 

For collectors, originality is key. That, and some kind of personal connection. “I had wanted a Ferrari Dino since I was 12, in silver with black interior,” says Mr Li. “I stumbled upon one exactly like that in Milan. It had just 8,000 miles on the clock and I bought it from its second owner. It had all the original books, tools, keys etc. The owner had even kept every spark plug that had been replaced”. He also advises that any prospective owner gets the car thoroughly checked. “The Alfa Duetto was a good lesson in that respect. It was fine mechanically, but the body panels were filled with filler. Basically it was a rust bucket. I had it put right and enjoyed it for the summer, but since then I make sure every car I buy is inspected by a specialist.”

 

Peter Wallman, an advertising exec turned classic car expert for RM Auctions, explains what makes one car more desirable than another. “The marque, rarity, usability, originality, provenance, and condition. There’s a certain amount of fashion involved. Most customers are now of an age where cars from the 1950s, 60s and 70s were what they lusted after when they were young, and now they can afford them. The older pre-war vintage cars are thus of less appeal, perhaps, than the newer shapes. Ferraris will never go out of style; as a brand it still maintains its authority and sex appeal like the early days. It has the romance of it being Italian and the passion that invokes, and the fact Ferrari still compete in Formula One is significant. They know their value. To this day they still build the best supercars, and in very low numbers.”

 

For many, part of the appeal of ownership is becoming members of prestigious car clubs and attending concours and rallies around the world, such as Pebble Beach in California, the Mille Miglia in Italy and England’s Goodwood Revival. Once rather grassroots affairs, many of these enthusiast events are now sponsored by leading luxury brands and have become glittering social dates, attended by Oscar winners, Forbes cover stars and royalty.

 

These events are all about passion, as are the cars themselves. Traditionally, the sportiest models were purchased out of a yearning for romance and adrenalin. But the sharp and steady increase in prices, particularly when it comes to the most exotic, have inevitably led to a different clientele attending auctions. It’s a fact that many traders the business seem keen to deflect, but some buyers are more obsessed with ROI than history. The record-breaking 250 GTO sold by Bonhams had been owned by one wealthy Italian scion for five decades, before Fabrizio Violati’s estate sold it and 72 other cars from his collection to an investor group. They put the GTO up for auction in Monterey two months later.

 

“The number of customers selling cars in a short space of time has increased, but we try not to treat [the cars] as an investment opportunity and encourage enthusiasts to enjoy a return on investment but not expect it,” says Peter Wallman.

 

Should the car have had a famous owner, though, chances are it’s going to balloon the value – particularly if it’s Steve McQueen. It’s even become known as the Steve McQueen-effect in the trade. A nice mk1 Porsche 911S should be worth in the low six-figures. Two years ago, RM sold the one McQueen drove in the opening scene of Le Mans for US$1.375m. One of the cars at Monterey this August was the movie star’s 1967 Ferrari 275 GTB/4, which sold for US$10 million. Similar cars unassociated with celebrities have gone for around US$3.75m.

 

The fact that he took delivery of it on the set of Bullitt ads to the cache. Colin Comer, a contributor to Road & Track magazine, explains it needs a story as well as a big name to make it worth millions. “Elvis owned hundreds of cars, so it doesn’t matter he bought a 1975 Cadillac and gave it to his manager. But Elvis’s yellow 1971 DeTomaso Pantera – a notoriously unreliable car, which wouldn’t start one day, and he took a pistol and shot it full of holes. That increased the value quite a bit.”

 

But, as the Monterey GTO illustrates, the most important part of the lineage is rarity. McQueen came by his 275 GTB/4 after he traded in his much rarer 275 GTB/4 NART Spider (only 11 were made). He’d been rear-ended on the Pacific Coast Highway and baulked at how long it would take to repair, handing the damaged car back to the dealership along with US$14,400 to replace it with a hardtop coupe. Bad move. Last year, one of the other ten NART Spiders went for US$27.5 million, unaided by the Steve McQueen-effect.

 

Like any investment, there’s always that nagging feeling of whether it’s best to sell or stick. Yet when was waiting more fun than this? This isn’t an investment you sit on, it’s one you sit in. While you’re holding on for the best price you can hold on through some high-speed turns. Surely that’s the best reason not to go for a quick sale, but quick everything else.

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