A Classic Investment

A pristine classic car can be an indicator of a successful investor; but can the right set of wheels become a golden investment in itself?

Cars depreciate. That’s pretty much guaranteed as far as the vast majority of cars are concerned. Each passing year, or owner added to the log book, takes it a step closer to ‘old banger’ territory, and ultimately the scrapyard. However, buy the right car and you could be one of the very few people who manage to sell a car for more than you paid for it (car dealers excluded of course).

Since the financial crisis, traditional investments haven’t performed as well as in previous years, leading many investors to look for new opportunities. Art, fine wine and classic cars have all seen increased interest. I don’t follow the art or fine wine markets, but certainly in the case of classic cars, this increased attention and competition for the most valuable cars has driven prices up. The classic car market has had its share of bubbles and busts though, so to provide the familiar disclaimer, past performance is no indication of future returns. If and when traditional assets pick up, it’s possible that the new investors will have been ‘bitten by the bug’ and stay in the market, keeping prices buoyant. Alternatively, if they choose to exit the market and sell up, prices might fall quickly. A lot of long-term enthusiasts are priced out of the market at the moment, which might not bode well if prices falter.

So, if you do want to invest in vintage motors, which set of wheels would make the best addition to your portfolio? The choice depends on how much money you have available, and what you mean by ‘investment’. Investment-minded buyers usually fall into one of two camps: firstly, those setting out to make a ‘true’ investment (where the main aim of buying the car is to sell it later at a profit); and secondly, those whose main aim is to enjoy their purchase, but who buy with an eye on the possibility of their classic increasing in value enough to offset at least some of the costs of ownership.

If you’re intending to make a short-term investment it’s best to go for a model already showing a clear increase in price. The Aston Martin DB6 is the perfect example: prices have risen significantly over the last five years. In 2010 you could bag a good one for about £80k; currently, you’ll need to find £130K to £180K for a decent one.

Longer-term investments can be split into two categories: those that are ‘undervalued’, and those that are ‘not quite classics’. The key here is to either spot a model that will either become a classic in the timescale you’re looking to invest over, or one that will go from ‘undervalued’ to correctly or even over-valued.

‘Undervalued’ cars are those already considered classic, whose price is lower than it ‘should’ be. Until the last two to three years, the least desirable models from Ferrari, such as the Mondial or 400/400i, had been hanging around at the rock-bottom Ferrari price of £10k. A couple of years ago I’d have said to avoid them as investments, unless you’re trying to lose money. Recently however, values for the 400s seem to have increased to around £20K for a good one, so they might be a good buy after all – as long as prices don’t fall, leaving you with the Ferrari no-one wants. You’ll need to exercise your judgement as to whether the market for an undervalued car is about to take off.

Another strategy is to look for a car that’s destined to become a classic, but that isn’t quite there yet. By taking this route, you’re trying to buy a car when its price nears its lowest point, before it becomes highly desirable and the price rockets. As a rule, these ‘not quite classics’ are still seen as just ‘old’ at the moment – the key is to know which ones are likely to attract collectors in a few years. The Mark 2 Escort is one such ‘not quite a classic’ success story. Nowadays they’re worth real money, with just the bodyshell of a two-door likely to set you back £1,000. Yet in the early nineties the self-built ‘Locost’ kit car (popularised in Ron Champion’s Build your own sports car for £250) used Escorts as the donor car, because they could be picked up as MOT failures for as little as £50. This strategy requires you to play the long game: it can take twenty years to gain from this increase. Just as with the ‘undervalued’ moniker, phrases like ‘future classic’ crop up a lot in adverts for 10 to 15 year old cars. There’s almost certainly a lot of wishful thinking involved here, but in amongst the over-hyped old bangers there are a few smart investments to be made.

The big names are a popular bet in the ‘not quite classics’ market. New Ferraris, Aston Martins and Porsches tend to depreciate rapidly until they reach a low-point in terms of desirability (and therefore price) before regaining value as they become recognised as, then desirable as, classics. Buying near to this low point can return a reasonable profit. However, this isn’t a failsafe strategy. Some models from each of these marques haven’t seen a rise in prices as they age: the Aston Martin Lagonda of the 1970s and 1980s hasn’t seen much of an increase, while Porsche 924s seem forever condemned to be the ‘poor man’s Porsche’. Four-seater Ferraris appear particularly vulnerable to price restriction, so may be best avoided as investments.

Some classic dealers remember when decent E-types could be picked up for a bargain: today they’re worth at least £20,000. They’ve taken twenty years to increase by that much though, so this isn’t always a route to a quick profit. This approach is probably the most long-term of the ones we’ve described here. Because of that, you should bear in mind running costs could very well wipe out any increase and more.

It’s impossible to compile a list of cars to recommend that covers all budgets and investment strategies, but I’ve tried to pick out some interesting classics to consider, which stand a good chance of increasing in value over the next few years.

At the upper end of the price range there are some sure-fire bets. If you’ve sufficient funds to be seriously considering a Ferrari 250 GTO, Lusso, or 275 4-cam, you’ve probably already had a lot of advice from experts. If not you probably should do. For an investment classic like these, dealers such as Talacrest, JD Classics or Tom Hartley Junior would be a good starting point.

The Ferrari 250 GTO is always the one that grabs attention, as it’s the one that sets records at auction. This red-blooded sports racer is from a production run of just thirty-nine. Although road-legal, they were very definitely built as track cars – inside the cabin you don’t even get a headlining. They come in two body styles: the earlier, fastback style is the prettiest, in my opinion. Although their competition heritage is slightly over-sold (they mainly competed against other Ferraris), the 250 GTO is rightly considered one of the purest ‘driver’s’ cars. Prices start at around £25 million – a real thoroughbred of an investment. These cars also illustrate the warning about bubbles – at the peak of the ‘80s boom in classic cars, they changed hands for around $13 million (at the top end of the market, most cars are bought in dollars); just 3 years later asking prices had dropped to a mere $3 million.

Its cousin, the road-going Ferrari 250 Lusso is a favourite of mine. Ultra stylish and very quick, the Lusso has possibly the classiest, understated interior ever made: no radio (who needs one with that fantastic V12 exhaust note?), and just the right amount of diamond stitching, done before the style became a Range Rover cliché. “Cheaper” than the GTO, prices range from £800K for a project car, to £1.5 million for a really good one.

For a home-grown investment, look to the Aston Martin DB4/5/6. The DB5 was made famous after appearing in ‘Goldfinger’, and has starred in numerous Bond films since. You’ll need at least £100,000 to bag one, even a project car requiring complete restoration. Serious investors looking to target the classic market may wish to look earlier in Aston Martin’s illustrious series. Topping the price list is the achingly beautiful DB4 Zagato, valued at around £4 to 5 million.

For an investment with panache (and entry into a lot of exclusive councours events), the Bugatti type 57 could be the classic for you. The Type 57 came in a variety of body styles, including the elegant Atalante. Prices start at £110,000 for one of these, climbing to a shade over £5 million for the best 57S Atalante.

In the middle of the market is the ever-popular Porsche 911, a car with a big following amongst collectors. The value of earlier (1964-1973) cars has increased rapidly over the last few years, with £20k now the entry point. The “impact bumper” models (with plastic rather than metal bumpers) were made after 1973 up to the introduction of the water-cooled 996 series in 1998. If you can’t afford an earlier car, these might make a great investment. A couple of years ago you could find pretty decent ones for around £15,000; today that’s the bottom end of the price range. If you really want a 911 and only have £9,000 to £10,000 you’ll have to make do with a water-cooled 996 from the early 2000s – and being told you don’t have a proper 911 by purists. Air-cooled 911’s are pretty tough mechanically, but Porsche parts are absurdly expensive, and 911s can rust badly, so the cost of upkeep might mean they’re not such a great investment.

The Aston Martin DB7 is reaching its lowest price around now, and a reasonable one can be picked up for around £15k. They’re also around fifteen years old and savvy buyers could benefit from bagging one while it inhabits the ‘not quite classic’ category. In ten years the DB7 will be about 25 years old – and it has the makings of a classic (even though smug car bores will tell you it’s just a ‘Jag in drag’ as it’s based on Jaguar underpinnings).

Nothing whispers class like a Mercedes convertible, so if you’re after the feeling of wind in your hair or headscarf, consider the 1989–2002 Mercedes SL (R129 – Mercedes’ internal model designation. Confusingly, these don’t run sequentially). The beautiful ‘60s/early ‘70s 280SL (R113 – Mercedes’ internal model number) is out of the price range of many people at around £40k upwards, and a late ‘70s/early ‘80s R107 will set you back at least £10k for one that doesn’t need work. With its plastic bumpers, pop up roll-over bars and sloping bonnet, the R129s look a lot newer than their metal-trimmed forebears. While they may not have the cache of the 1970s Mercedes, they’re tough mechanically (and the electronics seem reliable too) and there are enough of them around to be very choosy when buying one. You’d be wise to track down the most desirable model – the 500 SL – in the very best condition you can find, as the price difference between good and poor means restoring one’s not financially worthwhile.

At the cheaper end of the market you’re unlikely to make huge profits, but there’s the potential to find a car that will increase by more than what it costs to maintain while you own it. Rather than opting for classics from premium manufacturers that have reached rock bottom (such as Porsche 944s) there might be more profit in mainstream models like Fords and Vauxhalls. These marques tend to have strong followings; collectors are often most nostalgic about the models they or their parents owned, or models which have become rare. Cars like the Cortina or Escort that could be picked up for a pittance are increasingly worth a great deal to the right buyer.

Sporting Fords are probably the best bet. XR3is and XR2s from the 1980s are still fairly inexpensive at the moment, but they’re harder and harder to find in decent condition. These hot-hatches are front wheel drive though, in contrast to the Escort MK2s that are desirable as rally replicas. A better bet might be the Escort Cosworth; although not in the bargain basement at the moment, they’re yet to reach the desirability levels of the Lotus Cortina or Escort Mexico.

Regardless of how much you’re looking to invest, if you’re new to buying classic cars, there are a few things to consider, and factor into your calculations before you buy. Cars need maintenance – and need to be used if they’re not to seize up. So-called ‘Barn finds’ are all the rage at the moment, but a 40 year old car with 5,000 miles on the clock may not be the safe bet it seems to be. If the car has been sitting around for a while it’s likely to need a lot of work to get it back on the road. The to-do list can be both extensive and expensive. Engines have a number of rubber seals which perish over time, particularly if the car hasn’t been run regularly. The resulting work might include a total engine rebuild, which on a rarer and exclusive car could easily run into five figures. Bodywork can also get very expensive if you discover rust lurking under the paint or underseal (If you see fresh underseal on a classic you’re considering buying that hasn’t just had a complete restoration start prodding the metal to check it’s solid). While a poor or tired interior may be easy to spot, that doesn’t make it cheaper: higher end cars may need seven or eight complete hides (at £800 each) – and that’s just for the materials. As a trimmer, I know how commonly people think re-covering seats is an hour’s work on the sewing machine – be warned, it isn’t! In the vast majority of cases, unless you can do a lot of the work yourself, or have a competent mechanic who’ll work for very little, you’d be advised to only buy cars in the best condition if your main motivation is investment.

If you’re new to the world of classic cars, or if you’re not but are looking to spend a good proportion of your available capital, you should find someone to help you avoid buying a lemon. The phrase ‘Caveat emptor’ could have been invented to describe the process of buying an old car. There are lots of garages and mechanics around who’ll provide a pre-purchase inspection; if possible, it’s a good idea to find someone who specialises in the model you’re considering, as they all have quirks and common pitfalls they’ll know to look for.

Just in case I’m putting you off, I should remind you that classic cars, unlike wine, can be enjoyed multiple times, and they’re a LOT more fun than share certificates.

About me

Mike Suter-Tibble is a life-long classic car enthusiast who runs Suitable Classics, a classic car upholstery and trimming company. He also writes occasional articles on buying, selling, restoring and driving classic cars on his website www.suitableclassics.co.uk.