Which Classic Car Should I Invest In?

The question above is one that I am asked constantly and my standard response is that I’m not a financial adviser. Investing in classic cars is a topic which seems to have been present in the media for some years now and recent developments within the market place have meant that I feel that now is a good time to lay out why I feel that investment is a term that does not belong in the classic and specialist sector.

The classic car market in its current form really began in the 1980s – before this, there were just old cars. There have been mainstays within the sector now for decades, for instance, E-Type and the DB5, but their place has been secured not by their market values but instead by their styling and importance in the hearts and minds of the buying public.

The growing interest in classic cars as a form of investment I feel really began in the years after 2008 once the HAGI index was created. The Historic Automobile Group was founded by a former investment banker and began tracking the prices of 38 models produced by 11 manufacturers. The emergence of the index, now the HAGI Top Index, is of great importance to those that promote classic cars as investments and is described as the “overall market measure for exceptional historic automobiles”.

It is hard to read or talk about investing in classic cars without mention of the Knight Frank Luxury index coming up. “Vintage cars prices rose 395% in the 10 years to the end of 2012…according to Knight Frank’s Luxury index” said the Financial Times in 2013. It is still possible to find the original 2013 Knight Frank report online and from this, we can find the source for their data – the HAGI index.

Knight Frank went on to create The Luxury Investment Index which began to make references to “asset classes” alongside other indexes covering wine, art, jewellery and classic cars. By this point, the specialism of the HAGI index, the tracking of the top 38 models in the world, had been lost.

An index that was tracking 38 blue-chip classics is now not only referred to as an asset class but is supposedly representative of the entire industry. In 2021 The Federation of British Historic Vehicle Clubs (FBHVC) stated that 51% of historic vehicle values in the UK were under £10,000 – hardly the realm of “exceptional historic” cars.

Traditional asset classes such as equities or bonds have some key attributes which set them apart from classic cars. Firstly, they are income producing – equities typically pay dividends and bonds a coupon. Classic cars are not income producing, the opposite in fact, as there are holding costs such as storage and maintenance to be considered.

There are structured marketplaces for equities and bonds which allow for quick and easy buying and selling which means that the holdings are liquid. One could have £500,000 invested in a FTSE 100 index tracker on Monday morning, decide to sell it later that day and be in receipt of the funds by Tuesday without being penalised by the market for wishing to exit quickly. If that £500,000 was instead held in an Aston Martin DB5 the number of options available to release the money held in the vehicle within 24 hours are limited, especially if trying to avoid a fire sale scenario. Classic cars do not offer the same liquidity as traditional asset classes.

Thirdly, equities and bonds are by and large comparable with one another. Product intricacies aside, a share in BP is a share in BP in the same way that an ounce of gold is an ounce of gold. Not so with cars – if there were two Ferrari 355s side by side with the same registration dates and identical mileage the values are not necessarily the same. One could have a manual gearbox and one owner from new whilst the other has an F1 gearbox and nine owners – the market will price in those differences. Classic cars are not easily compared to one another.

Additionally, unlike traditional investments the buying and selling of classic cars are unregulated and there aren’t professional analysts and ratings agencies present to aid buyer decision making.

There were a number of classic car funds which launched in the early 2010s which faded away, but there now appears to be a wave of new entrants here to take their place and offer investment vehicles that allow speculation on classic car prices. In my opinion, wanting to buy a classic car shouldn’t be driven by the desire to make money – it should be a purchase inspired by passion. For this reason, my answer to the question “what should I buy?” is always to buy with passion, not for profit.

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Published for Historic Motor Racing News, December 2021.