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Monday, May 27, 2013

The Case For Investment in Truly Great Classic and Vintage Cars - Guest Post By Christopher Renwick


In my line of business, I am constantly asked "What is my car worth?" Or, "Is the market up or down?" These are vital questions to be sure, given the buoyancy of today's classic-car market in general and the unprecedented interest it continues to generate today. But is there much more to the picture?

The answer is an unqualified yes. Today's guest post, and the first I have had the privilege to publish here, is by Christopher Renwick, one of the earliest and longest-running experts in the classic-car field. In fact, a high proportion of the great cars on today's market or residing within the world's finest collections have been handled by Christopher since the 1960s, when he began his career with Coy's in the UK. Christopher is also a veteran publisher, with over 50 titles in print.

In the following and very concise article, supported by complete data and information sources, Christopher makes a compelling case for the truly great cars as a proper alternative investment/asset class on their own, with long-term performance and growth characteristics far outpacing such more traditional financial assets as stocks and bonds, which carry far greater degrees of risk and uncertainty, rewarded only by incredibly poor long-term results. As Christopher says, while classic-car values may certainly rise or fall, you are still left at the end of each and every day with a beautiful tangible asset - an object of undeniable intrinsic value. And one with incomparable design, engineering, and history.


Here is Christopher's article and I wish to extend my sincere thanks to him for sharing his insights and for graciously allowing me to post them here. If you are in the market and wish to receive expert advice on how to diversify and strengthen your portfolio with this increasingly recognized asset class, do comment or ask questions in the "Comments" section below this post. 

Most importantly, the following comments are the considered and cogent thoughts of a recognized professional with approximately 50 years in the business. However, this material is in no way intended to replace the advice of the usual professional advisors, including your accountant, attorney, lawyer, solicitor, or tax professional. Accounting, legal, and tax requirements and considerations vary from jurisdiction to jurisdiction and must be considered first. 

For further information about Christopher, examples of the automobiles he has defined as meeting his "Great Cars" criteria, and how to contact him, please see his brand-new, beautiful, and totally clear website:  www.crenwick.com. You will be glad you did and be sure to bookmark it on your favourite browser!



Clarity of Investment Opportunity
by Chris Renwick

In 2013, a considerable proportion of investable finances are deposited into mainline banking systems, whether they be Credit Suisse, Bank of America or Lehmann Brothers etc. In many cases the question of how these finances are being leveraged by the holding institution, with respect to profit making activities, is never asked. The investment decision is made by the corporation, be it through speculation in real estate, stock market portfolio investment, or the secondary mortgage market.

Conventional Investment Based Opportunities - Facts

In 1965
  The S&P was at $633. In 2013 it is at $1700, representing an 2.1 % per annum return[1]
  The Dow was at $900. In 2013, it is at $15,000, representing a 6.3 % per annum return[2]
Gold was at $35 an ounce. In 2013, it is at $1,400, representing an 8 % per annum return[3]
The FTSE was at $105. In 2013 it is at $6,500, representing a 9 % per annum return[4]
As far as can be ascertained, no form of conventional investment has beaten these figures.
As knowledgeable classic car dealers, we are attempting to sell cars to people that enjoy or appreciate classic cars.
Mistake.
We should be attempting to sell cars to people that like money.
Classic Car Based Investment Opportunities - Facts 
The first public auction of collectable cars was the Swords sale in 1965.
In 1965 a ten year old Mercedes 300SL was $1,000. In 2013 its value resides at around $1,000,000, representing a 15.5 % per annum return.[5]
A Ferrrari 250 GTO was around $5,000. In 2013 its value resides at around $40,000,000, representing a 20 % per annum return.[6]
Tabulating all subsequent 1965 auction results, it becomes clear that important classic cars have appreciated on average a 12% compound interest return, with the really rare and desirable ones returning 18% per annum. 
In recent years this return on capital has actually escalated.
A McLaren was $4m in 2010. In 2013 its value resides at around $9m representing a 31 % per annum return.[7]
A GTO three years ago was $20m today it is $40m, representing a 29 % per annum return.[8]
A 300SL was $400k three years ago. In 2013 their market value resides at $1m, representing a  35 % per annum return.[9]
Speculative Analysis
Just as some banks, due to mismanagement, fail to reach certain prescribed levels of return on investment, cars could also fail to achieve their potential returns.
However if a bank was to go bankrupt, one would be left with nothing. If you put your money into a car at least you still have a car.




[1] Compound Interest Calculation based on valuations of the stock market as sourced from Financial Times US (1965 - 2013). 
[2] Compound Interest Calculation based on valuations of the stock market as sourced from Financial Times US (1965 - 2013).
[3] Compound Interest Calculation based on Gold Open Market Valuations as sourced from Financial Times US (1965 - 2013).
[4] Compound Interest Calculation based in valuations of the stock market as sourced from Financial Times US (1965 - 2013).
[5] Compound Interest Calculation based on valuations sourced from MotorSport(UK) (64-66) and Road & Track (US) (66-00) and Sport Car Market Letter (US) (00-13).
[6] Compound Interest Calculation based on valuations sourced from MotorSport(UK) (64-66) and Road & Track (US) (66-00) and Sport Car Market Letter (US) (00-13).
[7] Compound Interest Calculation based on valuations sourced from Sport Car Market Letter (US) (00-13).
[8] Compound Interest Calculation based on valuations sourced from Sport Car Market Letter (US) (00-13).
[9] Compound Interest Calculation based on valuations sourced from Sport Car Market Letter (US) (00-13).

3 comments:

  1. Replies
    1. Thank you! I am glad that this post is striking a chord with readers.

      All the best,

      Dave

      Delete
  2. Very interesting article ! Thank you !

    ReplyDelete