Classic car values – the economic argument

Classic car values – the economic argument
9th February 2014 Team CSF
Classic car values - the economic argument.

Classic car values – the economic argument

It’s the million dollar question. What is going to happen to classic car values over the coming months and years? There are so many factors to consider, but we look at the part that the credit crunch and the now recovering economy could have in defining the shape of the market. 

As we’ve pointed out in our February 2014 Market Report, we expect classic car values to continue to grow. There are a multitude of reasons for this, many related specifically to supply and demand, but there are greater forces at play and that includes the state of the global and UK economies.

The credit crunch and classic car values

When the credit crunch hit in 2008, the classic car market had been on the up for much of the noughties after being in the doldrums for the nineties. The market softened a little through 2008/2009 (the prices of modern supercars crashed at this time, but prices corrected themselves shortly afterwards) before recovering in 2010. The reason for this in was in part due to the desire for buyers to place their money in commodities and alternative investments due to the poor performance of the financial markets and a mistrust of financial institutions. After all many blamed them for the situation, their investments weren’t performing and it was perceived that money in the bank wasn’t necessarily safe. Did people choose to invest (we use this term in the loosest sense) in classic cars because they had nowhere else to put their money? Now that the economy is recovering, will we see the conditions that may have prompted people to buy classic cars disappear?

The cult of the classic car

We believe that the reasons people buy classic cars have changed. Classic car ownership is no longer a niche interest or simply a way of making a quick buck- it’s become a national passion. The Coutts Index has been designed to measure the performance of “passion assets” as alternative investments – and the best performing assets have been classic cars. Mohammad Kamal Syed , Head of Strategic Solutions at Coutts explained that that for many high-net-worth individuals, it is less about investing and more about purchasing – purchasing assets driven by their emotions.

[bquote]”The benefit is more than just profit. Owners can bond with like-minded people in an elite network, with assets offering escapism and a chance to re-enact history. Indeed, there is one thing that the Coutts Index, for all its robustness, can’t measure – and that is happiness. The idea of someone paying $50m for an uncomfortable old car, with windows that don’t work and a noisy engine, seems illogical. In many ways it is. But the happiness such a car can bring is immeasurable.”[/bquote]

Billion pound industry

The feel good factor and the passion for classics doesn’t just extend to the super-rich. It extends to buyers at all levels and the classic car industry as well. A 2011 report by the British Historic Vehicle Movement valued the industry and movement as a whole at over £4 billion.

  • The historic vehicle movement generates business worth £4.3 billion a year in UK.
  • Nearly £1 billion of this comes from overseas.
  • Over 28,000 people earn some or all of their living serving the historic vehicle movement.
  • 41% of businesses surveyed expect to recruit new staff within the next five years.
  • 57% of businesses surveyed have been trading for more than 20 years.
  • Over 850,000 vehicles made before 1981 survive.
  • 31% of historic vehicle owners have a household income of less than £25,000.
  • 68% of historic vehicles are valued at less than £10,000.

The passion for classic cars in the UK has reached epidemic proportions, and as money begins find its way back into the economy, we expect enthusiasts at all levels to continue their love affair with our motoring heritage. Combined with the perception of still limited opportunities in investment markets and the great performance of classic values, we expect classic car values to continue to rise.