The Coronavirus has changed our lives in the past months, from forcing us to stay at home to changing our work habits, home-schooling kids, and keeping social distances, it will continue to impact us for further months for sure. It will leave its imprint in our economy too, and forecasts do not look good, with high increase in companies bankruptcies and unemployment rate. Some sectors have suffered more from this unique crisis, like the airlines or the automotive companies. Let’s see how the situation will evolve for these companies but there are already some consequences we can see on the item that fuels our passion: the car industry, and most specifically the collector car market. Text: Mickael B. Photos: Kidston, Hagerty, Girardo & Co, RM Sotheby’s, DK Engineering ©

Ferrari Dino 246 GT - Kidston MotorcarsS
Ferrari Dino 246 GTS – Kidston Motorcars

The 2007 financial crisis impact

With Covid-19 and quarantine having been the new normal for two to three months in several countries, resulting in shops, restaurants, movies and bars being temporarily shut down, people have not been going out for all this time. Not going out, not traveling, means that they have spared some money. Adding the fact that most people cashed out from the stock exchange market since it was crumpling down, and you end up with a lot of people with quite a bit of cash in their hands. And right now, with the current negative interest rates all you don’t want is a pile of cash sitting in your bank account. So if you can’t invest it traditionally, what other choices do you have? The answers lies in what happened from 2008 after the financial crisis. At the time, people as well went to search for alternative investments after cashing out whatever was left from their stock exchange shares and bonds.

Hagerty Collector Market Analysis - 2008 Financial Crisis
Hagerty Collector Market Analysis – 2008 Financial Crisis

Alternative investments: collector cars

What are alternative investments? There are quite a few. Think about almost everything which is not a company’s share. From precious metals, to jewelry, wines, art, watches, and of course, automobiles. Some might argue that all those items might not be investments, and that would be true. Of course, if you buy a Swatch, or your children’s painting while they were 8, or a brand new diesel Peugeot 208, it might not turn out as a profitable item. I am not as well stating that you should buy cars purely as investment, but if you have an interest in cars and searching for a way not to lose (and hopefully) make money, there are some possibilities. I will not tell you all the tricks, but give you the main guidelines that I am aware of, on investing in the car collector market.

RM Sotheby's - BMW 850 CSI
RM Sotheby’s – BMW 850 CSI

Collector car investment strategy: the safe but expensive route

In alternative investments, and specially for cars, there are two routes you can choose when investing. One, which certain people might say will be less risky, but requires a substantially more important financial leverage, is to buy cars which are known to have increased consistently their value over the years, are already sought after, have always generated great enthusiasm, and which do not need to be restored or cost a fortune to maintain. Typical examples from these investments includes the Ferrari F40, the Mercedes-Benz 300 SL Gullwing or the Porsche 911 2.7 RS, like the one below, just sold at Girardo and Co. These cars will most likely not lose any money over time, but they might not increase as well as they have been at some period of time and represent a low risk investment for anyone with a substantial amount of cash looking to diversify its portfolio whilst still enjoying amazing cars.

Porsche 2.7 RS Lightweight - Girardo & Co
Porsche 2.7 RS Lightweight – Girardo & Co

Collector car investment strategy: the betting

Then there is the second type of investment, more risky, certain might say, but which could require less amount of money for a start. It consists of betting that certain cars are at their lowest value, or close to, and might either not lose anymore value, or hopefully increase, and in the best case see even their value multiply itself. This has been the case for instance in end of 2014 where you could get a low-mileage Ferrari 550 Maranello for less than 80’000 $ and then values surged 20% in 2015. Pre-merger AMGs as well are starting to see their time of glory with Widebody SECs (latest example selling at Amelia Island for close to 400’000 $ compared to prices below 100’000$ back in 2014), or W124 E60s having more than doubled their values in the recent years, like the one below, currently listed for sale in Switzerland. Remember as well when you could grab an original Porsche 930 Turbo for less than 30’000 $ at the beginning of the millenium? Try to find one now for less than 100’000 $. So the question is, what’s next?

Rising stars

In my opinion there are a lot of cars that should rise up in values in the upcoming years. Cars which are too low in terms of price, which are becoming rarer, and have become forgotten, in a way. Cars such as the Ferrari 355 Berlinetta, with its 5-valve V8 shouting over 8000 rpm and last of the traditional 308-inspired berlinetta look or the 360 Modena, which was a big new start for Ferrari in its time, and one of the last models available with a mechanical gearbox. I predict as well the W210 AMGs which should follow the trend of the W124s AMG given how special they are, and the fact they were the last hand-builts E-Class AMGs. A nice example of an E46 BMW M3 as well should increase even further in value, as they were the last naturally aspirated straight six M-car of the brand and are considered as one of the ultimate great sports cars of their time. Even the first SUVs from the beginning of the millenium I believe will rise to collector car icons, provided they have low mileage and great condition, like a pre-facelift 9PA Porsche Cayenne Turbo S, E53 BMW X5 4.6is, or W163 Mercedes-Benz ML55 AMG.

Ferrari 355 Berlinetta - DK Engineering
Ferrari 355 Berlinetta – DK Engineering

Covid-19 impact opinion

I strongly believe that given the current situation in which the Covid-19 has left the world, we are starting to see the same effect which was observed after the 2007 crisis with prices of collector cars going up as people will be looking for alternative investments in the upcoming months, if not years. You just have to look how well collector car brokers have sold the past few weeks to get a glimpse of the upcoming trend. Some of them are even struggling to get enough inventory and some cars which have struggled to sell in the past months or years are now gone. Will the cars sustain then the increase on the longer term? I believe it too. For a few simple reasons. First and foremost, let’s look again at the chart for Blue Chips from Hagerty. After the subprime mortgage crisis the market readjusted itself for some time before inevitably going back up as interest for those cars started rising again.

With more and more laws against CO2 emissions, noise level from cars, safety regulations which limit the designs, and driving assistances, old-school cars will be an even rarer sight. Something for which the offer is fixed (as none will be produced anymore), but the demand will still be increasing in the upcoming years, makes me strongly believe values will increase. Especially with people wanting more than just a car to go from point A to point B. Demand will surge further for cars that are involving, smell and sound like nothing you would be able to experience in an electric self-driven car. So, now might just be the time to get that collector car you were dreaming about, before you can’t afford them anymore, like so many other cars already.

Hagerty collector car market - 2007 to 2019
Hagerty collector car market – 2007 to 2019