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Classic Cars

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Garth Theunissen

Classic cars can offer returns as an alternative investment to traditional assets like stocks and bonds. Certain classic models have appreciated significantly in value, with some indexes showing returns over 24% in the past three years. However, it is important to choose the right car models to invest in, as some segments of the classic car market have performed better than others. For example, Ferraris from 1957-1972 surged 68% from 2007-2011 according to one index. Successful investments in South Africa include the Porsche 356, Mercedes Benz 280SL Pagoda, and Jaguar E-Type roadsters. Proper restoration is also key, as restoring the wrong car can result in losses. Some investment funds have also launched to generate returns by

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COMPANIES & INVESTMENTS C ars are normally purchased as status symbols rather than for their ability to deliver a return on investment, but like art and fine wine, certain classic ver- sions of the automobile can offer the ideal vehicle to diversify ones portfolio away from the traditional stalwarts of equities, bonds and cash. In the last year or so, more and more South Africans are buying classic cars especially the captains of industry who have a bit of extra money lying around, says Norman Frost, owner of Frost Brothers, a classic and vintage car retail- er in Knysna. Theyre usually boys at heart who are looking to have a bit of fun but its also about the prestige and nos- talgia that comes with owning a classic car. Its also nice to know that the car youve chosen is going to go up in value. Anyone who doubts the ability of clas- sic automobiles to deliver a decent return need only look at the so-called HAGI Top Index, which tracks the performance of 50 representative rare classic car mod- els. Developed by Historic Automobile Group I nte r n at ion a l (HAGI), a research house thats been compiling the measure since January 2009, the index has risen over 24% over the past three years. Of course, as with any asset class, the trick is knowing what to buy. Certain segments of the classic car market have performed better than others. The Hagerty Blue Chip Car index, which includes the 1973 Porsche 911 Carrera RS coup辿 and the 1957 Rolls- Royce Silver Cloud, increased almost 55% between August 2007 and Decem- ber 2011. Even more impressive was the Hagerty Ferrari index, based on models of the famous Italian sports car manu- factured between 1957 a nd 1972 , which surged an incredible 68% over the same period. On the other side of the spectrum though, the Hagerty index of American muscle cars such as the 1969 Ford Mustang and 1964 Chevrolet Impala, fell 34% over that period. History and nostalgia are very impor- tant in determining a cars value, says Frost. People assign a higher value to cars that they remember growing up with. For example, Frost says clients hailing from the Free State tend to have a liking for classic Chevvies or Mercs. One of the best Mercs to invest in, he says, is the 1968 Mercedes Benz 280SL, commonly known as the Pagoda. According to Frost, the Pagodas value has climbed from around R250 000 a decade ago to R800 000 currently a massive 220% in 10 years. Frost says another great investment has been the Porsche 356, which retailed for about R250 000 about 10 years Sunbeam Tiger 260 28 FINWEEK 29 MARCH 2012 FINWEEK 29 MARCH 2012 29 COMPANIES & INVESTMENTS Classic cars An underrated investment vehicle a g o a n d now sells for between R500 000 and R600 000. Jaguar E-type roadsters have also performed incredibly well, with average annual price increases ranging between R50 000 and R100 000 a year, depending on the cars condition. Frost says that E-type Jags typically retailed for R500 000 to 足R550 000 some 10 years ago and now com- fortably fetch as much as R1m. Its become a cult car in SA, says Frost. Because of the cost and hassle of importing cars into SA, theres a limited supply of cer- tain high-demand models, and that means people will pay handsomely for them. Still, investors need to be careful as par- ticular markets dont value all scarce cars equally. A perfect example seems to be the Sunbeam Tiger, which doesnt do all that well in SA despite the fact that only 73 were ever manufactured here. By contrast the Tiger is in huge demand in Australia. Alf Dragan, a Sunbeam enthusiast from Edenvale, says he tried to sell a Tiger 260 in 1997 for R40 000 but was offered just R20 000 in the local market. He eventually managed to sell it for R45 000 to an Aus- tralian buyer who was so keen to get his hands on the vehicle that he paid for all the transport costs in addition to the asking price. Dragan says South African Tiger owners are today exporting their cars to Australia for over R200 000. Its all about nostalgia, says Dragan, who adds that one of the reasons the Aus- sies like sourcing their Tigers from SA is that theyve usually suffered less rust dam- Such is the demand for classic cars as an investment that IGA Automobile LP has set up a fund that plans to invest in a carefully selected portfolio of the worlds most iconic cars. The fund aims to deliver returns by purchas- ing limited production classic cars and then selling them at a later date once they have appreciated in value. The Guernsey-registered fund, which began canvassing investors in January 2011, wants to raise as much as 贈150m by 2018 by acquir- ing vehicles like the Ferrari 250 GTO and the Aston Martin DB4 Zagato. Acquisition costs gen- erally range from 贈100 000 to 贈500 000 a vehicle. None other than Pink Floyd drummer Nick Mason sits on the advisory board of the IGA Automobile fund, which has said its targeting annual returns of 15%. Another fund set up at the start of last year is the Liechtenstein- registered Classic Car Fund, which plans to achieve annual returns of 17% per annum and raise 350m over five years. n Investment Car Funds TheTelegraphreportedinNovember 2011 that Warren Buffett, widely considered the worlds greatest investor, was offered the Harrah Collection of cars which included a 1932 Rolls Royce Salamanca and a Bugatti coup辿 of the same year, for less than $1m. Buffett spurned the opportunity, only to see a small part of the collection auctioned off a few years later for $69m. Johann Ruperts F r a n s c h h o e k Motor Museum, housed on the grounds of his LOrmarins wine farm, is p r o b a b l y one of the finest classic car collec- tions in SA with over 200 vehicles ranging from the 1898 Beeston Motro Tricycle to the 2003 Ferrari Enzo supercar. While its tempting to assume that Rupert has sought to learn from Buffetts mistake, Wayne Harley the curator of the museum suggests otherwise. The majority of the cars in the Museum do not belong to Mr Johann Rupert or to the Franschhoek Motor Museum, Harley said in an emailed response to questions from Finweek. Other than this fact, we have no further comment. Whoever the collection ultimate- ly belongs to, its fair to assume its worth a pretty penny. n July 2011 Jan 2012 SOURCE: HAGI March 2011 HAGI top index Index value 130 125 120 135 140 145 End March 2011 to end February 2012 Index Performance % Change YTD 2.33% **3 Years 24.25% Learning from Warren BuffetTs Mistakes age over the years than their Austra- lian counterparts from coastal cities like Brisbane, Sydney, Melbourne and Perth. By contrast, SA tends to have a big appetite for the 1956 Austin Healy 100 Roadster as well as the aforementioned E-type Jaguar. Those are the real money spinners over here, says Dragan. The biggest risk to prospective investors he says, is picking the wrong car, especially one that needs to be restored. Restoring a car today is very expen- sive, he says. If you dont restore the right car you can come seriously short. Garth Theunissen gartht@finweek.co.za Mercedes 280SL Pagoda Aston Martin DB4 Zagato Hagerty Blue Chip index US$ Jan 2010 Dec 2012 SOURCE: Hargerty Aug 2007 960 000 840 000 720 000 1 080 000 1 200 000 Warren Buffett Buy classic cars with Jay Leno Jay Leno, host of The Tonight Show, has joked that its cheaper to have 35 cars and one woman than one car and 35 women. Thats easy to say when you consider that Leno reportedly earns around $32m a year and has an estimated net worth of at least $150m. Not bad for someone whos the dys- lexic son of an insurance salesman and a housewife. Lenos wealth has enabled him to accumulate a vast collection of rare and valuable cars, including classics like the 1956 Austin-Healey 100 BN2 and the 1956 Chevrolet Nomad. Prospective investors can see Lenos tips on collecting classic cars on his website, Jay Lenos Garage (www.jaylenosgarage.com).

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Classic Cars

  • 1. COMPANIES & INVESTMENTS C ars are normally purchased as status symbols rather than for their ability to deliver a return on investment, but like art and fine wine, certain classic ver- sions of the automobile can offer the ideal vehicle to diversify ones portfolio away from the traditional stalwarts of equities, bonds and cash. In the last year or so, more and more South Africans are buying classic cars especially the captains of industry who have a bit of extra money lying around, says Norman Frost, owner of Frost Brothers, a classic and vintage car retail- er in Knysna. Theyre usually boys at heart who are looking to have a bit of fun but its also about the prestige and nos- talgia that comes with owning a classic car. Its also nice to know that the car youve chosen is going to go up in value. Anyone who doubts the ability of clas- sic automobiles to deliver a decent return need only look at the so-called HAGI Top Index, which tracks the performance of 50 representative rare classic car mod- els. Developed by Historic Automobile Group I nte r n at ion a l (HAGI), a research house thats been compiling the measure since January 2009, the index has risen over 24% over the past three years. Of course, as with any asset class, the trick is knowing what to buy. Certain segments of the classic car market have performed better than others. The Hagerty Blue Chip Car index, which includes the 1973 Porsche 911 Carrera RS coup辿 and the 1957 Rolls- Royce Silver Cloud, increased almost 55% between August 2007 and Decem- ber 2011. Even more impressive was the Hagerty Ferrari index, based on models of the famous Italian sports car manu- factured between 1957 a nd 1972 , which surged an incredible 68% over the same period. On the other side of the spectrum though, the Hagerty index of American muscle cars such as the 1969 Ford Mustang and 1964 Chevrolet Impala, fell 34% over that period. History and nostalgia are very impor- tant in determining a cars value, says Frost. People assign a higher value to cars that they remember growing up with. For example, Frost says clients hailing from the Free State tend to have a liking for classic Chevvies or Mercs. One of the best Mercs to invest in, he says, is the 1968 Mercedes Benz 280SL, commonly known as the Pagoda. According to Frost, the Pagodas value has climbed from around R250 000 a decade ago to R800 000 currently a massive 220% in 10 years. Frost says another great investment has been the Porsche 356, which retailed for about R250 000 about 10 years Sunbeam Tiger 260 28 FINWEEK 29 MARCH 2012 FINWEEK 29 MARCH 2012 29 COMPANIES & INVESTMENTS Classic cars An underrated investment vehicle a g o a n d now sells for between R500 000 and R600 000. Jaguar E-type roadsters have also performed incredibly well, with average annual price increases ranging between R50 000 and R100 000 a year, depending on the cars condition. Frost says that E-type Jags typically retailed for R500 000 to 足R550 000 some 10 years ago and now com- fortably fetch as much as R1m. Its become a cult car in SA, says Frost. Because of the cost and hassle of importing cars into SA, theres a limited supply of cer- tain high-demand models, and that means people will pay handsomely for them. Still, investors need to be careful as par- ticular markets dont value all scarce cars equally. A perfect example seems to be the Sunbeam Tiger, which doesnt do all that well in SA despite the fact that only 73 were ever manufactured here. By contrast the Tiger is in huge demand in Australia. Alf Dragan, a Sunbeam enthusiast from Edenvale, says he tried to sell a Tiger 260 in 1997 for R40 000 but was offered just R20 000 in the local market. He eventually managed to sell it for R45 000 to an Aus- tralian buyer who was so keen to get his hands on the vehicle that he paid for all the transport costs in addition to the asking price. Dragan says South African Tiger owners are today exporting their cars to Australia for over R200 000. Its all about nostalgia, says Dragan, who adds that one of the reasons the Aus- sies like sourcing their Tigers from SA is that theyve usually suffered less rust dam- Such is the demand for classic cars as an investment that IGA Automobile LP has set up a fund that plans to invest in a carefully selected portfolio of the worlds most iconic cars. The fund aims to deliver returns by purchas- ing limited production classic cars and then selling them at a later date once they have appreciated in value. The Guernsey-registered fund, which began canvassing investors in January 2011, wants to raise as much as 贈150m by 2018 by acquir- ing vehicles like the Ferrari 250 GTO and the Aston Martin DB4 Zagato. Acquisition costs gen- erally range from 贈100 000 to 贈500 000 a vehicle. None other than Pink Floyd drummer Nick Mason sits on the advisory board of the IGA Automobile fund, which has said its targeting annual returns of 15%. Another fund set up at the start of last year is the Liechtenstein- registered Classic Car Fund, which plans to achieve annual returns of 17% per annum and raise 350m over five years. n Investment Car Funds TheTelegraphreportedinNovember 2011 that Warren Buffett, widely considered the worlds greatest investor, was offered the Harrah Collection of cars which included a 1932 Rolls Royce Salamanca and a Bugatti coup辿 of the same year, for less than $1m. Buffett spurned the opportunity, only to see a small part of the collection auctioned off a few years later for $69m. Johann Ruperts F r a n s c h h o e k Motor Museum, housed on the grounds of his LOrmarins wine farm, is p r o b a b l y one of the finest classic car collec- tions in SA with over 200 vehicles ranging from the 1898 Beeston Motro Tricycle to the 2003 Ferrari Enzo supercar. While its tempting to assume that Rupert has sought to learn from Buffetts mistake, Wayne Harley the curator of the museum suggests otherwise. The majority of the cars in the Museum do not belong to Mr Johann Rupert or to the Franschhoek Motor Museum, Harley said in an emailed response to questions from Finweek. Other than this fact, we have no further comment. Whoever the collection ultimate- ly belongs to, its fair to assume its worth a pretty penny. n July 2011 Jan 2012 SOURCE: HAGI March 2011 HAGI top index Index value 130 125 120 135 140 145 End March 2011 to end February 2012 Index Performance % Change YTD 2.33% **3 Years 24.25% Learning from Warren BuffetTs Mistakes age over the years than their Austra- lian counterparts from coastal cities like Brisbane, Sydney, Melbourne and Perth. By contrast, SA tends to have a big appetite for the 1956 Austin Healy 100 Roadster as well as the aforementioned E-type Jaguar. Those are the real money spinners over here, says Dragan. The biggest risk to prospective investors he says, is picking the wrong car, especially one that needs to be restored. Restoring a car today is very expen- sive, he says. If you dont restore the right car you can come seriously short. Garth Theunissen gartht@finweek.co.za Mercedes 280SL Pagoda Aston Martin DB4 Zagato Hagerty Blue Chip index US$ Jan 2010 Dec 2012 SOURCE: Hargerty Aug 2007 960 000 840 000 720 000 1 080 000 1 200 000 Warren Buffett Buy classic cars with Jay Leno Jay Leno, host of The Tonight Show, has joked that its cheaper to have 35 cars and one woman than one car and 35 women. Thats easy to say when you consider that Leno reportedly earns around $32m a year and has an estimated net worth of at least $150m. Not bad for someone whos the dys- lexic son of an insurance salesman and a housewife. Lenos wealth has enabled him to accumulate a vast collection of rare and valuable cars, including classics like the 1956 Austin-Healey 100 BN2 and the 1956 Chevrolet Nomad. Prospective investors can see Lenos tips on collecting classic cars on his website, Jay Lenos Garage (www.jaylenosgarage.com).