Andrea Modena, director of Ferrari’s classic vehicle division, relates how a Ferrari owner sold his 1962 250 GTO because his wife complained it was too loud. It was either she or the automobile.
Today, I’m not confident that the wife would have prevailed.
Indeed, times have changed. In 2018, the same Ferrari model sold at auction for $48 million, making it the most expensive car ever sold. Last year, a 1955 Mercedes-Benz 300 SLR Uhlenhaut Coupé broke the previous record by fetching 135 million euros ($149 million).
In a surge of investment in this alternative asset, these types of megadeals represent the vanguard of billions of dollars annually spent on classic vehicles worldwide.
According to Knight Frank’s 2023 wealth report, the value of vintage automobiles has increased by 185% over the past decade, outpacing the growth of luxury competitors wine, timepieces, and art, and ranking second only to rare whiskies.
The market has expanded beyond a relatively small community of collectors to include investors attracted by the potential for high returns and the lack of correlation with traditional portfolio assets such as securities and bonds.
Giorgio Medda, CEO and global director of asset management for Italy’s Azimut, said, “We’ve been monitoring the market for a long time.” Classic vehicles have become a financial asset class that our clients should include in their inventories, according to the track record of the past three decades.
This year, the asset manager is establishing what it calls the world’s first “evergreen” fund to invest in vintage vehicles, and it will only wager on cars worth more than one million euros.
The fund, advised by Alberto Schon, the director of Ferrari and Maserati dealer Rossocorsa, will select vehicles with distinctive histories, according to the fund’s website.
Hetica Capital, a modest Swiss asset manager, launched a 50-million-euro ‘closed-end’ fund in 2021, claiming it was the first of its kind.
The Hetica fund, which aims for returns of 9%-15% after seven years, has purchased 12 automobiles thus far and aims to acquire 30-35 automobiles by the end of the fifth year, leaving the final two years to sell the automobiles and pay investors.
The designs are audacious.
In the past, there have been more than 100 initiatives to establish funds. Nobody has built both a diversified investor base and a diversified car portfolio, according to Dietrich Hatlapa, proprietor of the classic car research firm HAGI, which provides Knight Frank with sector data.
It is also not a field for the financially timid.
Both the Azimut and Hetica funds have a minimum investment threshold of 125,000 euros and are registered in Luxembourg.
Walter Panzeri, who manages Hetica’s Klassik Fund, said, “We get a lot of calls from people looking to invest between 1,000 and 2,000 euros, but we have to decline them.”
In addition, a minor scratch or dent, or a replacement component, can be financially devastating. For instance, replacing the fender of a classic car can cost up to $15,000, according to Modena.
Preserving the vehicles
According to Florian Zimmermann, who began collecting vintage automobiles when he worked at Mercedes-Benz and has since amassed a 300-vehicle collection with a partner, operating expenses for car collections, such as storage and insurance fees, can easily amount to 5-6% of the portfolio’s value annually.
“It is becoming increasingly difficult to locate qualified mechanics to maintain these vehicles. “You must spend a considerable amount of money to keep all of these vehicles in working order,” he said.
In fact, investment funds managing car portfolios can be a lucrative source of revenue for the classic car divisions of manufacturers, which not only provide repairs and components, but also certify the authenticity of vehicles participating in shows and competitions.
According to Peter Becker of Mercedes-Benz Classic, the certification procedure alone can cost around 20,000 euros, and only the automaker’s specialists with access to its archives can affirm the originality of a classic model.
Despite this, the classic car market is expanding as the number of affluent people increases. According to Knight Frank, the value of vintage cars increased by 25% in 2022, their finest performance in nine years and second only to the art market’s 29% increase.
Hagerty, a classic vehicle insurer, estimates that collector vehicle transactions worldwide, including auctions and private sales, total approximately $80 billion annually.
While North America remains the largest market for auctions, with Hagerty recording $3.4 billion in auction sales in 2022 compared to $774 million in 2007, a growing number of purchasers have emerged in the Middle East, India, and China in recent years, according to Zimmermann.
They will become sacred objects
According to some market participants, the global race to abandon internal combustion engine automobiles will only serve to increase interest in these vestiges of a bygone era.
“Electrification will favor classic cars,” stated Cristiano Bolzoni, director of Maserati Classiche, the company’s vintage car division. “Over time, they will become cult objects.”
According to Adolfo Orsi, proprietor of the Classic Car Auction Yearbook, which has been monitoring auction sales data since 1990, Ferraris are the most valuable vintage automobiles. He described them as “absolutely the blue-chips of this sector.”
In 2021-22, Ferraris averaged $589,900 at auction, followed by Mercedes-Benz vehicles at $378,800 and Porsches at $350,000.
Over the past five to ten years, the classic car community has undergone a tremendous transformation, according to Zimmermann. “Once upon a time, only persons were intimately familiar with automobiles. Over time, however, others concluded, “I like these cars, I can afford one, and I don’t lose money by purchasing one.”