“If you own one or two cars, which you purchased for fun, any market correction should be irrelevant to you. And if the collector car market does deflate for a time, then treat this as a buying opportunity. Frankly, many frustrated, priced-out-of-the-market collectors have been hoping for just such an event,” Sass says.
“Draw up a shopping list of cars that will have a quick rebound from a correction. Maybe some of the cars that have only recently just climbed out of reach — the cars that went from $25000 to $40000 to $50000 in the last few years — will soon be accessible again, such as Alfa Romeo 1750 and 2000 GTVs, Series II Jaguar E-type coupes, Porsche 911 SCs and Carreras and even Ferrari 308s.”
Apart from these highly collectable top marques that have been fetching off-the-charts prices, for newcomers the market is quite accommodating and there is something to suit everyone’s pocket. Groenevelt’s advice is to spend in your price bracket but aim for the best possible quality. Like any investment, if you are going to drop the cash, you need to consult the experts and do your homework to avoid any nasty surprises. However, he says: “You should buy because you’re passionate and not just based on pure economics or returns.” He also reminds me that no matter how informed you might think you are “they’re going to give you shit”.
Despite a growing interest in restoration and the Restomod trend (keeping the outward appearance while replacing all outdated parts with modern technology), Klaus Grogor of Backdraft Exotic Car Boutique’s advise is “first of all one has to look at the production numbers [scarcity], the provenance, but mostly the condition of the vehicle. Some people also prefer to purchase a car at a lower cost and carry out a restoration. I would recommend purchasing in the best condition available. Although more expensive to start with, this is probably a better buy in the long run.
Long-term, the drivers of growth in the segment are sustained by an increase in HNWI numbers and younger buyers who also continue to enter the market.
“Considering that the world population is growing on a daily basis, there are many more buyers now than there used to be,” Grogor adds. So as Generation-X drives the new wave of buying and nostalgically eye more modern classics from the 80s and 90s, maybe the larger production numbers don’t matter as much? Who knows, with some even younger buyers looking to stand out from the crowd but still wanting reliability, we are bound to see growing interest in early performance model sedans like the BMW M3 (E36) and ‘hot hatches’ like the Ford Focus RS or ST, first generation VW Golf GTi or CTi, and Japanese coupes.
Scarcity is not the only driver. Take Porsche for example. “There is a lot of hype in the market about collectability,” says Groenevelt, despite his bias towards Porsche. “I suspect largely driven by reputation, accessibility and a bit of status. People are paying hugely inflated prices for mid-to-late 80s model 911 Carreras, which had production figures of around 75000. Porsche is in a bit of a bubble similar to that of 2004 just before the economic crisis, when we saw 10%-15% growth. This dropped off in 2008. It is also similar to the muscle car bubble of 2005 and 2006. There is hype in terms of collectability and people are over paying and overlooking other investment possibilities. If you compare a 911 with say a Ferrari 308, which only made 10000, it doesn’t make sense. People are using money rather than their intelligence.” The Porsche 911 range, however, does offers a variety of entry points and is a reliable daily drive.
“There are three kinds of buyers: collectors who have plenty of money and space to store their collections, and who look for rare cars; first-time buyers looking for something different but practical; and repeat buyers. If you only have space for one car then a 911 or Merc R107 makes sense as they have all the mod-cons like a/c and power steering and can be enjoyed as a daily drive. Demand for cars also depends on age. Ten years ago it was the muscle cars of 30s and 40s and now it is 911s and the ‘Magnum PI’ Ferrari 308,” he says.
At the top of the pyramid there is plenty of disposable wealth but how are most buyers funding their habits? “Banks haven’t woken up yet and are still happier to finance a depreciating ‘assets’ rather than cars that at the very least hold their value over time,” says Groenevelt. “A lot of our buyers in their 40s and early 50s are taking a serious look at their financial portfolios, their RAs, and the long-term view is generally that they are better off making a withdrawal and investing in classic cars.” Due to their age and increase in local property values, others buyers are accessing funds from their bonds at lower interest rates.
The great benefit of investing in the right classic is not only its potential hedge value but it is a tangible asset that will bring you tons of joy, which the stock market seldom offers.
“Restoration projects are popular but owning a classic is now also about making a fashion statement and Porsche is very popular for this,” says Webb. “They are affordable and keep pace with inflation. Parts and servicing are available and of course it’s a recognisable status symbol.”
According to Groenevelt (and the Hagerty graphs I consulted), the R107 body Mercedes Benz models like the ‘Bobby Ewing’ 450SL from the 70s and 80s have already “quadrupled” in price in the last five years. “No one really considered these to be collectible classics. Once its predecessor the W113 ‘Pagoda Top’ had been snapped up — now fetching R1-million plus — people started taking note of the R107.” It also has more appeal to a generation that grew up with Dallas.