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Historic cars: a classic investment vehicle?

Historic cars: a classic investment vehicle?

It sounds like the perfect alternative investment for the motoring enthusiast: put your hard-earned savings into buying a beautiful old vehicle that will not only provide you with driving pleasure but also make you money.

Classic cars are enjoying a renaissance in popularity. Despite the bottom falling out of the market in the early 1990s, it has recovered spectacularly over the past decade and a bustling trade is now taking place at specialist auctions across the country.

The Historic Automobile Group International (Hagi) Top Index, which measures the global market for rare collectors’ cars, rose to an all-time high of 309.78 in September 2015, a gain of 13.8% year-to-date.

Dietrich Hatlapa, founder of the Historic Automobile Group, which publishes the data, said the overall trend was positive.

‘The long-term growth rate is quite strong,’ he said. ‘It is somewhere around 13% [per annum] if you take all the years from 1980, which included a bubble bursting in the car market. As 2013 to 2015 have been very strong, we’re now seeing a return to normality.’

Hatlapa, who said the costs involved in maintaining and storing classic cars were justified by the growth rates being enjoyed, attributed the strong performance to a variety of macroeconomic factors.

‘If no returns can be achieved on normal bank accounts, some of that money will find its way into the classic car world,’ he said.

However, not everyone is convinced by the story. Citywire + rated Gary Potter, co-head of multi-manager at F&C Investments, said such investments should only be a relatively small part of a person’s overall portfolio, as they come with inherent risks.

‘It is a question of what people will pay for certain assets but we’d never go near fine art or vintage cars as it’s not our area,’ he said. ‘Buying such an asset is just a punt on the valuation at that point in time.’

Racing ahead

Investment in automobiles is not restricted to the classic car market. The Volkswagen (VW) emissions scandal may have tarnished the reputation of big auto manufacturers, but there are an array of motoring-related start-ups hoping to be the next Uber.

Noelle Baquiche, spokeswoman for the UK Business Angels Association (UKBAA), said: ‘Innovations in smart navigation systems, the internet-connected car, and lower emission technologies are all examples of this growing innovation landscape. Uber and [short-term car rental firm] Zipcar both began their journeys with angel finance, followed by venture capital rounds.

‘There is scope to get an equity stake in the business in their early stages, whether you invest in an auto-focused venture fund, actively join an angel group or access opportunities through crowdfunding platforms,’ she said.

An example is Tevva Motors, a finalist in the 2015 UKBAA Angel Investment Awards, which created a prototype for range-extended electric trucks to carry out high-volume urban deliveries while minimising harmful emissions.

Motoring memorabilia

Private equity investments carry considerable risks, with many companies failing to fulfil ambitious business plans, and the difficulty of selling shares that are not publicly listed is a major concern.

Petrolheads can instead express their enthusiasm through collectibles and motoring memorabilia, such as model cars, brochures, books, oil and petrol cans, enamel badges, and plastic construction kits.

‘It has to be something with a good marque as certain items are very collectable,’ said motoring author Giles Chapman. ‘People like things to do with Mini, Land Rover, VW and MG [Cars], but no-one is interested in anything to do with Hyundai or Seat.’

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