It seems like only a matter of weeks go by before an auction worth tens of millions sets a new record price for a classic car sales. Whether it be the $52 million paid for a Ferrari 250GTO or the record £6 million paid for an Alfa Romeo back in September, prices are rocketing past 8 figures. But, why have cars become such hot property not just for motor enthusiasts, but full time investors?
Classic Car Sales – 5 Reasons for Soaring Values
1. Rocketing Values.
Classic car prices have increased 400% over the past decade, far outpacing the FTSE 100 (55%) and comparable to gold prices until their recent crash. While there’s no guarantee how long any boom will last, the most prestigious brands remain attractive investment opportunities through recession and the bursting of bubbles.
2. No Capital Gains Tax.
Cars are defined as a ‘wasting asset’, meaning they (supposedly) have an irreversible decline in value and as such do not incur any capital gains tax when sold for a profit. This does also mean you can’t write off losses if selling a car for less than you paid, but if you’re a smart investor when it comes to cars this is not a problem you’re likely to encounter.
Cars come with an emotional attachment very different from other investments, young kids grow up dreaming of owning specific cars and they play a huge role in popular culture – think James Bond or Steve McQueen. This type of collecting, based on love, rather than purely profit, helps drive prices up when common sense dictates they should be heading down.
4. Foreign interest
Other luxury commodities like art and wine have seen huge interest from emerging affluent classes in countries like China. Cars, however, have been slower to catch on partly due to import restrictions, which has made them more favourable investments in Europe and North America. Though it likely won’t be long before the BRIC countries feel the need for speed.
5. Classic Car Trading Funds
The emergence of car investment funds has allowed those with a passion or appreciation for cars, but not necessarily the expertise to invest some of their money in automobiles. The funds are in their infancy and whether they will pay off in the long term remains to be seen, but if they can demonstrate good returns, another avenue of investment will increase prices even further.