Classic Cars: The Best ‘Alternative Investment’ of All

Mon, Oct 7, 2013, 9:35 AM

This week hundreds of thousands of car enthusiasts will descend on Hershey Park in Pennsylvania for the annual classic car show and auction. The value of classic cars has jumped 39% this year, according to the Historic Automobile Group Index (HAGI), which tracks the financial performance of 50 rare and exotic classic cars. These cars have outperformed collectibles such as gold, wine, art, stamps and coins over the last 10 years. And more investors turned to cars after the global stock selloff in 2008.

Ferraris, Alfa Romeos, Bugattis, Bentleys, Aston Martins and Duesenbergs often sell for millions of dollars every year at the world famous Concours D'Elegance Pebble Beach and Amelia Island auctions, but classic cars have never been the exclusive toys of the rich and famous. Last month on the boardwalk in Wildwood, NJ, owners of Corvettes, Fords, Chevys, Pontiacs and Plymouths were proudly showing off their cars to judges and the public, hoping to win a “best in show” prize. Inside the Wildwood Convention Hall, more than 100 muscle and antique cars were up for auction, at prices the average car fan could afford.

David Gooding, president and founder of auction house Gooding & Co., has sold thousands of classic cars over the years. He says the beauty, mystique and history of these cars are what make them so valuable and coveted by collectors from around the globe. The auction house had a 91% sale rate at the two-day Pebble Beach auction in California, with an average price per lot of $965,675. Thirty of the 127 cars Gooding offered at Pebble Beach sold for more than a $1 million a piece, including the $8.745 million sale of a 1937 Bugatti Type 57SC Atalante, a new world record for a Bugatti sold at auction. Gooding says 75% of classic car buyers are based in the U.S. but there has been growing interest from new collectors in Asia, the Middle East and South America.

“Automobiles are recognized as an art form,” he tells The Daily Ticker. “People are realizing they are exciting to collect. You can drive them and take them around the world. A car can be a passport to adventure.”

The classic car that has seen the greatest price appreciation is the Ferrari. A 1963 Ferrari 250 GTO racer was acquired this summer in a private sale for more than $52 million, making it the world’s most expensive car. It beat the previous all-time record of $27.5 million for a 1967 Ferrari 275 Spyder that was sold in Monterey, Calif. in August. The HAGI Ferrari Index has gained 44% since January but Dietrich Hatlapa, founder of the Historic Auto Group Index, worries that the recent explosion in the classic car market may be due for a correction.

“Classic cars have been a very good performer in terms of value appreciation and the financial crisis helped classic cars and collectible markets,” says Hatlapa in a phone interview from Europe. “But some of the growth rates we’ve seen are not sustainable in the long term. The art and wine markets have already corrected. You really have to know what you’re doing.”

Don Williams, a classic car dealer and collector, rejects the idea that the classic car market could be a bubble.

“A bubble is when people are speculating with borrowed money,” he explains. “I think [classic cars] are the most solid form of investing in the world. Where gold keeps getting dug up, stocks keep getting printed, the cars are very, very limited. We’re in an infancy level compared to any other form of investing. The hobby has expanded so internationally that we have 10, 20, maybe 30 times as many potential buyers than cars.”

Williams, president of the internationally known Blackhawk Museum in California and owner of The Auto Collections in Las Vegas, has been described “as the man who buys and sells more million dollar cars than anyone in the business.” His personal collection of 100 cars includes a $7 million Bugatti and a 1966 Chevy Impala convertible. In his 40 years of collecting, Williams has owned between 8,000 to 10,000 cars: "I'm addicted," he admits. Even with rising prices, Williams encourages individuals who have always wanted a classic car to take the plunge.

“Not everybody is equipped financially to just start collecting at the high-end level,” Williams notes. “Buy one that you can personally afford, one that will bring enjoyment to your life, not a financial burden. Cars have brought a lot of friends into my life. It cuts through all language barriers.”

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