How To Invest in Collectible Cars

Imagine a time when a Ferrari 250 GTO, now one of the most coveted classic cars, was sold for a fraction of its current value. The reason? Its owner's wife found it "too noisy." Today, the same model of Ferrari is smashing auction records, selling for jaw-dropping sums of up to $48 million.

The world of collectible cars has undergone a remarkable transformation, becoming a multi-billion-dollar market. It is now attracting investors who seek high returns and diversification from traditional asset classes.

The value of vintage automobiles has soared by 185% in the last decade, according to Knight Frank's 2023 wealth study. This outperforms other high-end assets such as wine, watches, and art.

In this article, we'll explore the world of investing in collectible cars, discussing its current state and investment potential. We'll analyze the growth factors and the rise of collectible car funds, as well as delve into appealing subcategories within the market.

Here are four collectible car investment funds we feel could provide good investment opportunities:

1. Hetica Klassik Fund: Hetica Capital has introduced the Hetica Klassik Fund, the first investment fund focused on acquiring, maintaining, enhancing, and relocating classic cars.
   
   The fund aims to transform these luxury assets into a store of value, offering long-term returns and preserving investors' capital's purchasing power.

2. TheCarCrowd: Operating in the UK, TheCarCrowd is an online investment platform that purchases classic cars and establishes them as limited companies.
   
   The platform offers up to 1,000 shares in each company. Customers can acquire partial ownership of the chosen car by purchasing between one and 100 shares.
   
   

3. The Inspira Classic Car Fund: The Inspira Classic Car Fund offers a wide range of investment products in a digital format. In addition, it provides a lifestyle club to complement its offerings.
   
   Investors who become Inspira members gain access to unique lifestyle services and experiences. This allows them to enjoy the financial benefits of their investments while enhancing their day-to-day lives.
   
   

4. Rally: Rally simplifies asset acquisition and management by handling all paperwork and securing storage. Each asset is transformed into a separate "company" with equity shares that can be traded on their marketplace.
   
   Investors can easily buy shares during the initial offering, and after 90 days, they can increase their holdings, participate in price discovery, or sell shares to other users.

Investment funds in the collectible car market offer varied approaches and levels of involvement for investors. Each fund has its own set of benefits and features, allowing investors to choose the one that best meets their investment objectives and preferences. These funds allow investors to participate in the collectible car industry on their own terms.

That being said, it’s a good idea to step back, and discuss why investing in collectible cars offers one of the most exciting and potentially lucrative options right now.

The Evolution of the Classic Car Market

Historically, a tiny group of passionate collectors dominated the classic car market. The market has grown dramatically over time to accommodate a larger variety of investors. The possibility of big returns and the lack of correlation with traditional portfolio assets like equities and bonds appeal to these investors.

This shift has led to classic cars being recognized as a unique financial asset class. As a result, asset management firms have launched dedicated funds that include vintage vehicles in their clients' portfolios.

Although investing in old automobiles can be quite profitable, it is not a strategy for those with weak financial resolve. The market demands significant investment quantities, with institutions like Hetica Capital establishing 125,000 euros as the minimum entry investment threshold.

Running car collections incurs maintenance costs. This typically includes storage and insurance fees, which can amount to 5-6% of the portfolio's value annually. It is crucial to conduct thorough research and exercise caution before venturing into this alternative investment avenue.

Understanding the Definition of Classic Cars

Cars are one of the worst investments you can make in the short run. When you drive an automobile off the lot, it begins to depreciate. A new car might lose up to 30% of its value in the first year. Furthermore, high-end cars depreciate faster than ordinary ones.

Video games are the only consumer commodity with a higher depreciation rate. Within the first year of release, these can lose 50% to 75% of their value. But something strange happens over time. That dynamic changed about 25 years later. Cars might begin to appreciate in value.

That being said, it’s a good bet you’ll have trouble finding any (if any) excited buyers for that ’96 Toyota Camry you have out in the back. Yes, we know they last forever, but that doesn’t qualify them as classic car material.

However, a vehicle does not have to be old to be termed a "classic car." For example, Japanese sports cars from the 1990s (such as the Nissan Skyline GT-R and Mazda RX7) are gradually becoming classics.

To understand the investment potential of classic cars, it is essential to define what qualifies as a classic car. Unlike traditional investments that generate income or dividends, classic cars derive their value from factors such as historical significance, unique design, and limited production.

So, here are a few key considerations that classic car investors will take into account:

● Historical importance: This is especially important for vintage cars, namely those built before World War II.

● One-of-a-kind design: Nowadays, every car looks the same. What distinguishes a design? A distinct design should incorporate crucial elements such as more personality, definition, chrome headlamps and bumpers, huge bad hood ornaments, and wood trimmings.

● Limited production quantities: Older automobiles frequently had substantially shorter production runs. In 1967—the first year of production—only 2,000 Shelby GTs were made available. In contrast, Tesla is creating 100 times as many Cybertrucks.

The Historical Journey of Classic Car Investing

Investing in classic cars dates back to the early twentieth century. This is when the market started to gain traction, thanks to the efforts of prominent collectors and the start of automobile races.

However, it wasn't until after WWII that classic vehicle investing really took off. The boom occurred as the Baby Boomer generation accumulated wealth and sought to acquire these relics of a bygone period.

Renowned auction houses such as Bonhams, Christie's, and Sotheby's played an important part in fueling interest in historic cars. This resulted in exceptional sales and record prices.

The Current State of the Classic Car Market

One of the drawbacks of investing in alternative assets is that they often lack comprehensive data. That is why companies like Alts.co have taken the initiative to develop exclusive indices for various unconventional investments. These indices cover a wide range of assets, including vinyl records, tequila, and concert posters.

Fortunately, classic cars stand apart from the crowd, benefiting from several reliable indices that track their prices. Before diving into the details, let's take a broader view of the market.

Knight Frank Luxury Investment Index

According to the Knight Frank Luxury Investment Index, vintage automobiles have increased by 25% in the last year, according to its most recent 2023 report. This makes them the second-best performing luxury asset, trailing only fine art.

HAGI Index

It's worth noting that classic cars, like startups, fall into the category of more volatile alternative assets. Nonetheless, they have repeatedly demonstrated their resilience. For example, the HAGI graph shows that during the 2008-2010 crisis, classic vehicles outperformed other important collectibles and indices.

Hagerty Index

As early as 2014, signs of impending challenges in the market emerged. To understand the current state, investors should take a look at the Hagerty Index data. Hagerty categorizes the market into seven segments and utilizes the Hagerty Market Rating, which considers various factors, to gauge its condition.

Hagerty categorizes the market into seven distinct categories:

1. 1950s American

2. British Cars (yeah baby)

3. Ferrari (gets its own category!)

4. Blue-Chip (mostly Ferraris)

5. Affordable Classics

6. German Collectibles (sehr gut)

7. Muscle Cars

All indices use auction sales data to populate their graphics. However, Hagerty has something called the Hagerty Market Rating. This index measures the present state of the classic car market in terms of activity, directional velocity, and strength using a weighted methodology.

Ultimately, the collectible car market is thriving, as evidenced by extensive data and outstanding indices. It offers abundant opportunities for investors interested in entering this captivating alternative asset class. Opportunities range from the high-end blue-chip segment to the growth potential of affordable classics and the enduring popularity of muscle cars.

Preserving the Legacy of Classic Cars

Florian Zimmermann is a passionate collector who has 300 vintage cars in his collection. According to Zimmerman, the annual operating expenditures for automobile collections, including storage and insurance payments, could translate to 5-6% of the portfolio's worth.

In addition, finding experienced mechanics to repair these vehicles has become increasingly difficult and expensive.

The classic car divisions of automakers can benefit from investment firms that manage automobile portfolios. After all, they offer upkeep, replacement components, and authenticity certification for participation in events like shows and contests.

The cost of certification alone can reach 20,000 euros. According to Peter Becker from Mercedes-Benz Classic, in order to verify a historic model's authenticity, access to the automaker's archives is necessary.

Despite the costs, the market for classic cars is growing due to the rise in the number of affluent people. Classic car insurer, Hagerty, calculates that private sales and auctions combined account for nearly $80 billion in annual global collector car transactions.

North America continues to dominate the auction market, experiencing substantial growth from $774 million in 2007 to $3.4 billion in 2022. However, Zimmermann observed an increasing number of buyers emerging from the Middle East, India, and China in recent times.

Classic Cars Poised to Become ‘Cult Objects’

The global shift to electric cars will heighten the appeal of classic cars, turning them into coveted relics. Cristiano Bolzoni, Maserati's vintage car unit head, predicts that classic cars will attain cult status as electrification advances.

Adolfo Orsi, the founder of the Classic Car Auction Yearbook, emphasizes Ferraris as the most coveted vintage vehicles and refers to them as the "blue-chips" of the classic car industry.

Significant changes have occurred in the classic vehicle community. According to Zimmerman, more individuals are becoming interested in these vehicles and seeing them as both enjoyable and potentially rewarding investments.

How to Invest in Classic Vehicles

Investing in classic cars has grown in popularity as an appealing alternative asset class, with the potential for both enjoyment and financial benefits. Understanding the options that are available for investing in classic automobiles is critical, whether you are a passionate car lover or a savvy investor.

Investing in classic cars can be an exciting and potentially profitable venture. There are several ways to invest in classic cars, including through auction houses, live events, and platforms/funds. Let's discuss each of these methods in detail:

Auction Houses

Auction houses are a popular avenue for buying and selling classic cars. They provide a platform where collectors, enthusiasts, and investors can bid on classic automobiles.

Here are some key points to consider when investing through auction houses:

● Research and Due Diligence: Before attending an auction, do an extensive study on the vehicles available, their market worth, and historical significance. Learn about the condition, history, and rarity of the vehicles that interest you.

● Attend Auctions: To experience the environment and learn more about the classic automobile market firsthand, think considering going to auctions in person. This enables you to assess the condition of the vehicles and consult with professionals in the field.

● Online Auctions: Many auction houses now provide online bidding systems, which provide ease and access to a larger selection of historic automobiles. Take advantage of online auctions, but be sure to thoroughly inspect the vehicle and verify its condition before bidding.

Live Events

Attending live classic automobile events, such as trade shows, exhibitions, and rallies, can provide an opportunity to meet dealers, buyers, and industry professionals. Here are some tips for making the most of live events:

● Networking: Engage with other classic automobile enthusiasts, collectors, and professionals. Connect with vendors, experts, and possible partners who can give useful information and opportunities.

● Professional Advice: Attend expert-led seminars, panel discussions, and workshops. These classes can teach you about classic automobile trends, restoration procedures, and investment ideas.

● Marketplace Evaluation: Take the time to go around the market and evaluate the variety of historic automobiles on offer. Examine the condition, rarity, and market demand of various cars.

Platforms and Funds

In recent years, online platforms and investment funds have emerged, making it easier and less expensive to invest in historic cars. Here's what you should know:

● Online Platforms: Individuals can buy and sell classic automobiles through various online channels, such as classic car marketplaces and dealerships. These platforms frequently include thorough information, images, and, in some cases, inspections for listed vehicles.

● Investment Funds: Investment funds for classic cars aggregate money from investors to buy and manage a collection of these vehicles. These funds are often managed by professionals with understanding of the classic car sector. Diversification and access to a larger selection of historic automobiles are two benefits of investing in funds.

● Research and Due Diligence: When using platforms or investing in funds, do extensive research on the platform's reputation, performance history, costs, and management team's level of experience. Recognize the terms, investment approach, and associated risks.

Four Funds for Investing in Collectible Cars

Hetica Klassik Fund

Hetica Capital

● Car selection criteria: The Fund will base its selection on the FIVA (Fédération Internationale des Véhicules Anciens) definition of "historic vehicle." According to this definition, a classic car is a mechanically driven road vehicle that is at least 30 years old.

Furthermore, it is preserved in a historically accurate state and is not used as a daily mode of transportation.

● Store of Value: Like gold and silver, classic cars can act as a "store of value" against inflation and devaluation. The demand for classic cars is expected to grow due to the prolonged period of negative real rates and expansive fiscal policies, attracting new market segments seeking protection.

● Stock Exchange Listing: One of the share classes offered by the fund is an exchange-traded certificate. It can be subscribed for through Euroclear and Clearstream via banks or trading platforms, similar to other exchange-traded securities.

● How to Invest: Hetica Klassik is a closed-end investment fund with a 5-year duration, operating under Luxembourg law. Qualified and professional investors can subscribe to the fund through banking channels or via the Frankfurt/Vienna Stock Exchange.

Get in touch with the Hetica Klassik Fund.

TheCarCrowd

TheCarCrowd 

● Sourcing of Collectible Cars: We source and handpick only the finest, most famous automobiles from the UK's most prestigious automotive dealerships, which we independently verify, to ensure you get the best. Everyone is chosen based on their potential to appreciate and provide a high potential return on investment.

● Share: A limited company is formed for each individual car. This corporation issues fractional shares, and once fully funded, the company becomes the only owner of the car, with the stockholders holding 100% ownership.

● Store: TheCarCrowd shall be responsible for the storage, maintenance and insurance of the Vehicles for a maximum period of five years. The associated expenses are already included in the share price. Investors have access to all of the vehicles at its Nottinghamshire storage facility six days a week.

● Sell: Investors can vote every year whether to keep or sell the vehicle for a maximum of five years. Profits will be returned to investors in proportion to their investment.

Get in touch with TheCarCrowd.

The Inspira Classic Car Fund

The Inspira Classic Car Fund

● Responsible: The Inspira team believes that investing in a sustainable manner is critical to success and that it can help shape a better future for our world and society. Their unique sustainability, environmental, and ethical beliefs are strongly ingrained in every aspect of their organization.

● Digital: The investment landscape is being transformed by digital technology. Inspira hopes to pave the way for a new era of investing that embraces the digital future.

● Holistic: Inspira approaches their work in a comprehensive manner. Their objective is to make your wealth work for you in terms of both financial and quality of life.

● Powered By The Inspira Utility Token: Inspira is launching the first tokenised wealth management club in the world. The Inspira utility token allows their users to gain access to a variety of investing and lifestyle goods, as well as member advantages and discounts. Learn more here!

Get in touch with Inspira.

Rally

Rally

● Assets to Appreciate: Rally is a marketplace where investors may purchase and sell equity interests in collected items. The team "rallies" to make investment in ideas, emotions, and communities safe, simple, and easy. The end outcome...Everyone should have a portfolio in the twenty-first century.

● App-Centric: Unlike Vinovest and FarmTogether, which have web-based platforms but no apps (contrary to this strange Forbes article), Rally offers gorgeous apps for both iOS and Android and aggressively promotes them. They technically have a web login, but using their platform on the web is honestly disappointing when compared to the app experience.

● Completely US-centric: You need a US phone number and address, but that’s not all. Even having an American bank account won’t suffice. No – to use Rally you’ll need a US Social Security Number. Hopefully, they will be able to begin spreading to eager potential users in Canada, the United Kingdom, Europe, and, of course, the world's wealthiest per capita nation.

● More than Cars: They began with automobiles, and much of the copy revolves around automobiles. However, they are rapidly evolving into more than just automobiles. They've already expanded into a wide range of items, such as trading cards, watches, booze, and sports memorabilia.

Get in touch with Rally.

Conclusion

What are the prospects for classic automobile investments? Can this time-honored and environmentally sensitive asset class survive in a world dominated by efficient, electric, and self-driving cars?

We have faith in them. Nostalgia is a timeless emotion that is still relevant today. Furthermore, old cars are engineering wonders, but new cars frequently lack individuality. These reasons point to a bright future for gorgeous and rare historic cars, which are expected to appreciate greatly in value.