The rise of interest, and investment, in supercars
For most people, next to buying their home, a car is one of the largest purchasing decisions they will ever make. From the excitement of muscle and speed to the enjoyment of luxury and splendour, the automobile can also become one of the most treasured investments in a portfolio.
By: Johnny Duncan
Volume 5 | Issue 6
As an investment, supercars offer a solid form of diversification in that they hold, and even gain, in value. More investors are turning to supercars as they would to art, for both the enjoyment of showroom appeal and the expectation of appreciation, this interest in supercars as an investment has weaned very little during Brexit and previous market hiccups, and us not showing any signs of slowing down. The key factors to look for investing in supercars are value, timing, and of course, the details.
But compared to other investments like stocks, bonds, art, and real estate, how do supercars hold their value? Is it enough to purchase a super vehicle and sit on it and wait? According to Alex Prindiville, CEO of Prindiville PLC, a London based dealership with a global customer base, it can be. “Rare, Limited edition supercars will not only hold their value, they’ll give you a very substantial return on your investment. Take the LaFerrari, which was Ferrari’s first hybrid sports car, produced from 2013-2015, drawing on the company’s experience in Formula One. It’s a phenomenal car with a very desirable badge; only 500 were produced. They originally sold for £1m (roughly $1.2 million US), now they’re fetching £2.5m, even as much as £2.8m. Another ultra-rare numbered model is McLaren’s P1; they made just 375 of them and the price tag was originally £866,000 but just a couple of years later they are selling for £1.8 million upwards.”
As Prindiville states, there aren’t many other investment classes which can tell a comparable story. He believes that if you are buying the right supercar, the market remains strong and the car will at least hold its value, if not increase. “Low numbered Ferrari, Porsche and Aston Martin models will always be wanted and are fetching a premium,” says Prindiville. “However, this isn’t true of supercars across the board; many will depreciate in value and, if you don’t know what you’re doing, it’s easy to lose money. It’s a volatile industry and unless you have real expertise, it’s always advisable to use a broker who understands the market.”
All about the timing
The term “Supercars” is often used as a term for classic cars, which are also great investment. According to a Knight Frank report, over a 10-year period ending in 2014, the classic car market returned 467%, and was valued at more than over $7 billion. Though timing is key to many investment opportunities, Prindiville says that the best time to invest in classic cars would have been two or three years ago. Says Prindiville, “Classic cars have been a stellar investment for a long time, and they still offer some very good returns, but they won’t increase in value at the rate they have been doing unless you buy particular niche models.”
According to Prindiville, the market is always in flux and there us a new marketing opening up in modern classic. Just as the Jaguar E-type will always be special to a certain generation, so a new generation will relate to cars which meant something to them when they were growing up, whether it’s a BMW or a Mercedes. Or take the Ford Escort Mark 1; in 1986 that was the catch and it could fetch up to £100,000 now as it nears classic status.“ There is no magic wand you can wave to make sure you find the right car,” says Prindiville. “do your homework, look at the market, find out what’s hot and what’s not. For example, a Morris Minor will not give you a handsome return, but an Aston Martin DB5 or DB4 will make you mega-money. An Aston Martin DB5, produced between 1963 and 2964, sells for around £800,000, the DB6. Why? Because it was featured in Goldfinger and everyone associates it with James Bond.”
Returns are in the details
Prindiville states that classic cars have outstripped all other investment classes over a 10-year period from around 2005, beating art, wine, coins, stamps, jewellery, watches, furniture, Chinese ceramics, as well as real estate and equities. No other investment class has come close to matching the 467% return in the classic car sector. The nearest competitors have been wine, art and coins, which have all returned more that 200% in that time. States Prindiville, “The Market has started to plateau because supply is now catching up with demand, but in difficult times investors shift to tangible assets, which are beyond the whims of financial markets and cam be traded in any currency.”
Jay Leno invests in classic cars not for an investment, but drives every car he buys. “The most important bit of advice I’d give is only invest in a car if you love it,” says Prindiville. “You need to be passionate about it. It makes it much easier to put down the money if it’s a car you really appreciate because you’ll get so much enjoyment from it while you’re waiting for your investment to mature. If you’re only in it to make money. I think you’re in the wrong market. The key components to look for are condition; provenance, originality; and rarity. You need to know the car’s service history and see the records and you need to know where it’s come from and who owned it because that can add a great deal of value if it’s someone well-know or with a place in history. The originality and rarity comes down to how many models were produced, but it could also have to do with a certain color or particular interior features which were unique to a particular model.”
Because the supercars market is misunderstood, the risks involved put off more conservative investors. Even banks struggle to understand it. But, if you’re passionate about cars it’s a very attractive sector. Supercars command excellent medium to long-term investment potential and investors are keen to share in the benefits. But the true draw to them is the excitement of being involved in a world they love. Says Prindiville, “Investors can typically expect a 7.5% return on their investment over a five year period. For someone who loves luxury cars, this is a great world to be involved in but you’ve got to love it to understand it.”