Classic Cars: New Gold Rush for Investors?

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Are Classic cars the new Gold rush for investors? Look at a couple of examples of classic cars that have done well. A Ferrari 250 GTO originally built for British racing legend Sir Stirling Moss sold for a record $35m (£22.7m) in 2012. A decade earlier this classic vehicle was bought for a mere $8.5m. A McLaren F1 has gone for more than $3.5m and costs for $1m-plus cars tend to be accelerating fast, as they become more accessible. The classic vehicle market is in the throws of another boom, as well as its not simply the super-rich who can benefit.

According to an index of classic cars compiled by Historic Vehicle Group International (HAGI), valuations rocketed by 19 per cent in the first nine months of 2012 and by more than 25 per cent over the previous year. Because 1980, HAGI's index of collectible Ferrari's has grown on average over 15 per cent every year. Tangible assets such as art, wine, stamps, coins as well as antiques have always been an way for investors looking diversification. They've been especially popular when world economies hit the buffers, very now with inflation wiping out returns on bank deposits and volatile stock markets proving bad, both for the heart as well as the wallet. With the current Gold rush over, where can you invest the hard earned money? Time to maybe think about the classic vehicle investment marketplace. Which has a proven track record for performance, and generating income during the past decade. Even at the toughest time of the last world recession, the markets were still very buoyant and defied the recession by creating large returns for investors.

Over $260m value of classic cars sold at this many years Pebble Beach Concours d'Elegance in Monterey, California, and yet another sale held by RM in Battersea in October took more than £14m in an evening. In fact, major auction houses sold cars worth $610m in the year to 31 July, based on the latest Classic Car Auction Yearbook published by Historica Selecta up 20 per cent on 2011. Eight years ago, it was simply $141m. Average prices have jumped by 15 per cent, too, and 94 cars sold for more than $1m, two times as many as two years ago. In reality, the numbers tend to be much higher because less than a third of sales go through auction rooms, and there's no requirement to report details of private sales.

There's plenty of fuel in the Classic Cars tank:

"Purchasing a beautiful classic vehicle above $1m is a great investment as there is only one way the value is going!! There's not likely to be any shortage of customers, at least as long as interest rates remains thus stable at record lows. Most high end classic cars such as your Ferrari's and Aston Martins end up in the established markets of Europe and America, however there's growing interest from China, India, and from the oil-rich Middle East where there's a extended tradition of having vintage vehicles", mentioned Sarah Collins Owner Prestige Vehicle Finders.

If you do too, but don't have a very few million dollars to spare, there is yet another route. A number of money have been set up in the previous very few years specifically to invest in classic cars. You definitely won t find them listed in the Financial Times and their track record thus far isn't great, however it's worth looking at just what s on provide. Here's two classic vehicle investment funds that tend to be hoping to create a business module that investors will really make money from a classic car fund!

Aston Martin DB5

The Classic Car Fund (TCCF) pulled up inside weeks of IGA going public. Run by Italian fund manager Filippo Pignatti Morano di Custoza, it has offices in Liechtenstein and Switzerland, but is based in St. Vincent. Initially, it set a minimum subscription of just €100 (£80.97) and listed in Hamburg, but it all went quiet. Now, it's back as an unlisted private fund as well as asking for investments of at least $10,000.

The reorganized fund, introduced in September, wants to raise €3m in its first year. It's running just behind its three-month target, however is in talks with a large German bank and targeting other people there and across the border in Switzerland. A spokesperson states they'll buy at least two cars "shortly as well as predicts dazzling returns of 10-15 per cent a year.

Family Classic Cars Fund (FCCF) is the creation of Paul Charles, based in San Juan Capistrano, California, as well as with a minimum investment of $10,000 (£6,196.31) hopes to place together a $120m pot. "The reaction thus far has been really wonderful," states Mr Charles. "Most of the interest has come from the You and a couple in Europe." Americans must be accredited investors - worth over $1m or perhaps earning more than $200,000 a year - however you living outside the You is greeting. If any of these money can get the model to work, no doubt other people will follow.

Thus Precisely why Prestige Isn't a Fan of Funds:

Our biggest concern is investors have little learning of the marketplace as well as its nuances, and that classic cars should be bought for love, certainly not simply financial gain. Cars don't produce income, so the only method to profit is through capital appreciation over a long time period. It can be a bad investment as easily as a good one and the dead costs - subscription fees, insurance, maintenance and storage - will eat into any kind of profits.

That makes it difficult for a fund to produce year-on-year results. TCCF, for example, was prepared to use up to 3 per cent of the funds kitty just to pay commission to introducing agents, or perhaps fixers. And a 5 per cent subscription fee. FCCF additionally charges a great administration fee of over $13,000 a year as well as storage fees on top of that.

Both TCCF and FCCF charge an annual management fee of 2 per cent and takes 20 per cent of the profits if the funds net asset value exceeds a high watermark, typically its past peak. That's more in keeping with fee structures adopted by the hedge fund industry, as well as back-end loaded fees that way shouldn't present a issue as long as the marketplace keeps rising.

Just what we find a good deal more concerning is the valuations placed on each classic vehicle held in the funds. Simply how do you get an accurate net asset value (NAV)? Unlike the price point of the share, or even more traditional fund, valuing a classic car is trickier. No two tend to be the same as well as there's the issue of liquidity. Cars have no guaranteed buyer and about 30 per cent of those taken to auction go unsold. On the flip side, it is difficult for experts to predict what a private sale might make, which risks undervaluing the fund.

Precisely why Not: Drive it Yourself

If you have the knowledge, or are ready to do some homework, purchasing your vehicle might be a better method to play this investment theme. It's more fun, too. "If you know your onions you d do it yourself," a great old-hand tells me. "The reason why pay somebody else to do it?" You ll need a large garage, naturally, and there'll be insurance, maintenance and other costs to pay, however the benefits of investing directly go method beyond the financial.

"If you re interested in cars, however understand nothing about them, and think you d like to discover as well as kick a couple tyres then have fun in owning something," says Sarah Collins. "And, of course, there's the advantage of having a vehicle in the garage that dinner guests will like to sit in as well as listen to the roar of that great V12 engine!. Purchasing a classic car is all about the passion and love for that certain classic vehicle, Without passion, itMercedes Gullwing 300SL becomes a liability" On the and side if you make a profit, it'll be free of capital gains tax. "They are classified as a wasting asset, one that has a predictable life not longer than 50 years," explains Danny Cox at Hargreaves Lansdown. "Classic vehicle money, meanwhile, is subject to taxes on income as well as gains."

If you ve got the passion as well as the cash, what should you purchase? This is a tricky one, its about finding the happy balance between your passion and that classic car will make a good investment for you, that will turn into profits a very few many years from now. "It's all about desirability, sports car pedigree and good solid engineering," claims Sarah Collins. "A good investment-level Ferrari will set you back at least $100,000 and returns will probably be greater and come more fast at the higher end of the marketplace."

"15%: annual increase in valuations of collectible Ferrari's since 1980″

However the direct route doesn't have to be an expensive one. You can nevertheless pick up an iconic Jaguar E-Type series 1 coupe for about $50,000. Jaguar created thousands of them and its still a liquid marketplace. There tend to be many experts and spare parts, too. The 1960s Mercedes 230SL is yet another head turner as well as costs regarding the same. For yet another $25,000 you could drive away a decent E-Type roadster. Cars from the seventies are a little less fashionable, however Maseratis are worth looking at. "They're a 3rd of the cost of the Ferrari and the potential for gain is more. In my opinion, they were much better searching, too," claims Ms Collins. "The Maserati Merak is marketing for $20-30,000; it should be nearer $50,000."

Just what Now?

You ve like to find the classic car of your dreams, exactly what do you have to do now? Try to adhere to Prestige's Check List, this list is made to help you avoid the basic errors from purchasing a classic or uncommon car: Prestige's Check List: ■ Be ready to tie up your own money for 3-5 years. ■ Have passion. Without having it, classic cars can become a liability. ■ Purchase beauty, but don't fall in love with the bad cousin. ■ Buy your own dream car. Even if the world goes to pot tomorrow, you ll still have that. ■ Acquire knowledge - check auction results and trawl the Internet. ■ Begin a relationship with a friendly dealer, or contact Prestige to help you find your classic vehicle. ■ Understand the vehicle s history - is it in original condition or perhaps has it been restored? Peel back the carpets as well as check for rust.

Learn more about classic cars at http://prestigecarfinders.com/classic-car-investors