Is the classic car a good investment?

Schwarzer Oldtimer mit viel Chrom und Textfreiraum

Retrospective

The term “collector car” appeared in the 1930s when collector’s clubs were created, mainly in France and England. Like any collection, a rating allows the exchange or sale of the property based on its reference value.

To evaluate the price of a classic car in relation to its rating, several criteria must be taken into consideration:

  • The condition of the vehicle (authentic / restored / damaged)
  • The year the car was put into service
  • The origin and history of the car (owner, model ranking)
  • The market trend
  • The use of the vehicle (professional / private)

To control the movement of vintage cars, FIVA (FFederation Iinternational Vvehicles Aold) was founded in 1966. Today, it brings together more than 85 member organizations in 62 countries. Representing more than 1.5 million amateurs. Its missions are to:

  • Protect old vehicles (legislation, use)
  • Preserve their history (folders, referencing, archives)
  • Promote the movement (fairs, forums, international events)

In 2008, FIVA redefined the eligibility conditions for the accession threshold for collector cars. Thus, since 1 July 2009, the date of implementation of the reform, a car can obtain the mention “collection” on its registration certificate if the date of its first entry into service is 30 years or more (against 25 years previously). There are now 2 main categories:

  • Old-Timer or Classic Car (car registered before 1980)
  • YoungTimer (car registered between 1980 and 1999)

But how investors look for and buy a vintage vehicle?

Research and purchasing

Go to this site www.lva-auto.fr to have a view of the rating of the cars that interest you.

To buy a classic car, you can choose from among sales hotels, specialist dealers and private individuals. Going through a professional gives you traceability and a guarantee as to the condition of the collector’s car, even if the purchase price will be 10 to 15% more expensive than a direct purchase (between individuals).

Be careful though, because during auctions, you will not be able to try the car before the sale.

As far as the budget is concerned, prices can range from 10,000 to several million euros. To this, we must of course add the costs of insurance, interviews…

But why such a passion for vintage cars?

Reasons for the infatuation

Several factors explain this growth in the market for vintage cars. First of all, the increase in wealth is boosting the market for vintage cars (except in China, where the country is blocking imports). Indeed, this investment is a symbol of success that attracts the “new rich” while allowing them to build up their assets.

In addition, many investors have rejected financial markets, thus opening the door to other markets. Indeed, people prefer to invest their money in real life (real estate, art, wine, watches, vintage cars). Even if these markets are less liquid, they remain safe havens, especially in the event of a financial crisis.

Another reason is the lack of personality of current vehicles and their unreliability. The emergence of the “all-electronic” system has certainly improved driving, but it has multiplied breakdowns and reduced vehicle life.

Finally, one of the main assets of this market is the capital gains generated by resale. Indeed, the oldest models are becoming increasingly rare and there are more and more amateurs whose wish is to own this type of property. This leads to an inflation in the market for vintage cars and an increase in speculation on exceptional models. An investor who invested his money between 2004 and 2014 was able to obtain an appreciation of his classic car of nearly 180%. One of the factors behind this speculation is the date of the lifting of the blockade on Chinese imports, which remains unknown.

But what are the disadvantages of the vintage car?

Stresses
This investment has some disadvantages related to the fact that they are cars. The first constraint is maintenance, which can be costly. Depending on the value and rarity of the car, parts and amounts of overhauls can become expensive and reduce the investor’s final capital gain.

Add to that, the storage of this investment. Indeed, to protect your collector’s car from the unexpected and bad weather, you must park it in a covered car park, preferably private and secure.

Another constraint is the low liquidity of the vintage car market in the event of a sudden discount or fall. An investor wishing to reduce devaluation and thus loss will seek to sell as quickly as possible. However, the counterparty does not always have immediate liquidity.

And today, what is the vintage car market worth?

The classic car market today
Despite a slight decline in 2017, the market for vintage cars remains impressive. Here are some figures illustrating the size of this market:

  • 1900 vehicles auctioned in France in 2016
  • Average price growth of 18% /year
  • Global turnover of 27.7 billion in 2014
  • 800,000 vintage cars in France in 2016
  • Costliest car: the Bugatti Type 57SC Atlantic valued between 30 and 40 million €
  • Record transaction in 2017: €4,390,400 for a 1966 Ferrari Dino 206P Special Berlinette Special of 1966

What future for vintage cars?
Tomorrow
The growth of the vintage car market is not guaranteed for years to come. Indeed, since 2015 the market has been experiencing a decline in turnover and could maintain this downward trend for various reasons:

  • Over-valuation for some models with an irrational price increase
  • Correlation with economic conditions in importing countries
  • Motor vehicle regulatory changes (CO2 emission)
  • The drop in attractiveness in favour of another more interesting investment product

The market for vintage cars can also rebound as early as 2018, several factors may be the cause:

  • Speculation with the presence of 5 specialized funds
  • The growth in the number of collectors’ car enthusiasts
  • Defamation of financial products by investors

But then, is the classic car a good investment?

Conclusion
The classic car remains a “pleasure” investment. Although it provides an attractive growth performance, this type of investment involves significant constraints and risks. Indeed, the future of rolling stock remains uncertain with the exponential growth of technology and the likely emergence of “flying” cars. And as this market is not very liquid with a strong speculation, it is rather reserved for investors and informed amateurs.

References Echos BFM Business Capital

Anthony PERUZZO


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