Investing in Cars During Turbulent Times

Investing is for people with money, right? Especially during turbulent times. And I think we can all agree that we’re living in rather challenging times. So what if there was a way for all of us, or at least most of us, to benefit from the current situation we find ourselves in?

Pandemic Impact – US Personal Savings Rate

Number Crunching

For starters, this latest global pandemic has hit us a little differently from anything that’s come before. Restaurants, cafes, bars and shops have all been closed at some point, sometimes for months on end. We’re being encouraged to socially distance and avoid contact with others, and there are very few people who have been willing to risk holidays or any kind of travel in the last twelve months. People are not spending money, whether they want to or not, so there’s a lot of cash currently sitting in bank accounts around the globe. And with this in mind, people are seeking ways and means of investing their savings into something secure, trustworthy and predictable. 

In April 2020 alone, the savings rate in the US spiked from 7% to 33%, whilst by the end of November 2020, there was €120 billion in Irish bank accounts. At the same time the Bank of England reported a large disparity between high income families, whose savings have increased, and low income families who have been forced to dip into their piggy banks. Why is this important you ask?

The eye-wateringly expensive Ferrari 250 GTO

Well because those who will be looking to invest have even more money than before, and because they’re from high income families, they won’t be looking to invest six or maybe ten thousand into something. You’ll need to add one, two or even more zeros to that number. When you start to consider investments of this type, your first thought would be art, housing, stocks; and classic cars.

But even the classic car segment is no longer straightforward.

The Good Ol’ Days

We all know that a Ferrari 250GTO is highly desirable, that a Bugatti Atlantic SC is worth almost its weight in gold; that if you discover a Jaguar D-Type in a dusty barn, you don’t tell anyone. But things have shifted a little bit.

When I mentioned the turbulent world we live in, I didn’t just mean the last twelve months but the last decade; and perhaps a little more. Since 2008 and the world financial crisis, those with money have been encouraged to invest in things thanks to low interest rates and a nervous stock market. And the classic car market exploded. To put it in perspective, a 1962 Ferrari 250 GTO SI sold in 2014 at Bonhams auction for $38,115,000. An identical one sold four years later, in RM Sothebys, for $48,405,000.

But 2018 appears to have been the straw that broke the camel’s back.

Monterey Car Week Sell-Through Ratio Changes

Just a year later, in 2019, there were murmurings of stagnation, and even a downturn at the top of the classic car market. And by the end of last year, it was backed up by data. Hagerty, who compiles an index on car prices and trends across the market, used the sales at last year’s Monterey Car Week in California to highlight such a dip. Sales of cars valued at more than $1 million saw their sell-through ratio, which is a gauge of the success at auction, fall from 67% to 48%. Whilst every sector saw a drop, those vehicles below $100k saw a change of only 2.9% in comparison. 

So, what on earth does all this mean?

Be Careful

Essentially. But don’t be put off. 

What the market is seeing is considerable money being poured into the lower sections of the market. Ford Sierra Cosworths, Mk. I VW Golf GTis and Lancia Delta Integrales are suddenly the focus of considerable attention; and money. According to Classic.com, for example, the average price of a BMW E30 M3 Coupe increased from around $22,300 in January 2016 to roughly $48,000 by the end of 2019. And that’s just the tip of the iceberg.

Council Estate to Collectible – The highly sought-after Ford Escort Cosworth

So, with this in mind, it’s important to not get carried away and spend ninety grand on a 1996 BMW M3 Coupe 5-Speed because it’s sure to be the next big thing. It doesn’t quite work that way. But there are some fundamental things to look out for.

Low Mileage, Low Volume

These should be the two pillars on which you build your investment search. The first one sounds obvious, right? If you can find a Lamborghini Countach LP400S with two thousand miles on the clock, then that’ll be worth a damn-sight more than one with a mileage approaching the size of a phone number. But even this needs a cautious approach.

Be suspicious of low mileage, probe the seller and most of all look for signs of rust, worn materials (seats are an obvious giveaway, as are gearsticks and door handles) and feel free to test the car first. Push it into corners and listen for any knocking of the cv joints or suspension. 

In examples of restoration projects, the odometer is often reset, depending on the scale of the rebuild, but if components are left in original condition, be sure to chase down a certificate of the final mileage prior to restoration. The more information the better. Whilst a low mileage original is usually far more valuable than a low mileage restoration, it can all depend on the customer.

BMW E30 M3 sales (Classic.com)

So, what do we mean by “low volume”? Quite simply, the fewer items made, the rarer and more precious they are. It’s one reason that the Ferrari 250 GTO is such a highly desirable thing, another reason being its history (which we’ll cover in a sec) and also… well they’re stunning; which always helps. And we’ll cover that soon as well.

I’m sure there are a few cars that come to mind when we talk low volume, and I’m confident a handful of you will start reeling off custom vehicles from the GM Motorama stable or the wonderfully wacky Stout Scarab. And of course, if you can get your hands on these kinds of vehicles, fair play. I put my hands up and salute you. But for everyone else, there are other options.

For a start, consider the market in which you’re planning to sell, whether in the present or future. Check whether there were specific engine variants that weren’t sold in that market, special editions that never made it, or even paint variants that were unique to a certain region; anything that makes it standout.

What a beauty – 1978 Lincoln Versailles

Grand Designs

Speaking of standing-out, just the way a car looks can have a huge influence, and rightly so. You’ll surely know the Jaguar E-Type, Lamborghini Miura and Ferrari F40 as three of the most beautiful cars ever made, and this has only heightened their desirability, in addition to relatively low volumes (although the E-Type was made far more abundantly than the other two).

Yet at the same time, low volumes and tiny sales can also be blamed on pure, unadulterated ugliness, and you’ll want to stay well away from these ducklings. Ever heard of the Bristol Blenheim? Perhaps the 1977 Datsun F10? Maybe the Lincoln Versailles? It sold just over 50,000 vehicles in four years after all. 

To make things even more complicated, there’s also examples of cars that divide opinion hugely, but this can be spun positively and is arguably the type of investment to aim for; cars that some want and some want to stay well away from. The Citroën C4 Cactus is a great example, a car launched in 2014 and completely redesigned in 2018 to give it a more “grown-up” appearance; but the French firm removed the quirks that made early adopters fall in love with the car. Sold only in Europe, Australia, New Zealand, Hong Kong, South Africa and South America, this model is a sure-fire future collectible.

Iconic Design – Audi TT 8N (Mk. 1)

Another great example, but for different reasons, is the first generation Audi TT. Touching briefly on design once more, any piece of design that can be identified purely from its silhouette is iconic. Think the VW Beetle, the Coca Cola bottle or the iPhone; and you can add the Audi TT to that list. First conceived in 1994 and launched 4 years later, it was dropped into a segment with very few competitors, aside from perhaps the Mazda Miata (or MX-5) and the very cheapest Mercedes-Benz SLK. It was an instant hit, at least for it’s looks, but a series of early high-speed crashes involving quick changes in direction forced the Ingolstadt firm to recall all early models (Roadster and Coupe) and fit spoilers to the rear. So beware of any that don’t have this feature for starters. 

Heritage

History, provenance, celebrity ownership. Call it what you want, but if an item has a history of ownership that includes some form of celebrity, if it’s won awards and championships, if it has any history whatsoever that makes it stand out, it adds value.

Racing Heritage – 1982 Lancia 037 Stradale

Again, at the risk of repeating myself, it’s what makes the Ferrari 250GTO so special. Ford GT40s, Lancia 037s, even Subaru WRXs, without provenance, are so heavily linked to the racing heritage of their manufacturers that their popularity will only soar. And of course, If you can find a car once owned by Steve McQueen… well, you don’t need to be a genius to understand the impact it’ll have on the value.

But this is an aspect we won’t be focussing on here, because the opportunities are very rare, and the value so high that these types of cars are unaffordable for 99% of people. We’re here to cover you guys, not the 1%. 

So, having covered the main points to look out for, and key factors to consider, “what’s next?” I hear you ask.

Resources Available – Classic.com

Get Searching

Precisely. We’ve done all we can here in this overview, now it’s over to you. Get out there, scan websites, bookmark listings, auction sites, private sellers. Follow specific auctions to gauge the market and try guessing values and outcomes. Over time you’ll get better, naturally, as you understand the conditions and fluctuations. Places like: Classic.com, CarandClassic, eBay Motors and BringaTrailer are all good places to start.

Remember, the upper-end of the classic car market is already showing some signs of recovery after a shaky eighteen months, but it hasn’t stopped considerable money and focus being turned towards the lower echelons as well. But don’t let that put you off, because there’s still plenty of opportunities. 

In the coming months here at Cars Less Traveled, we’ll be sharing investment guides for vehicles that have so far gone under the radar a little, or even cars that may well be popular but have still not peaked. We’ll be sharing their histories, the quirks that make them so special and the key items to look out for.

So if that sounds up your street, please follow us, either by clicking below or by following our homepage; because we’re only just beginning, and you won’t want to miss it.

Future Collectible? – 1999 Audi S3

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