A small, rich group of about 100 collectors is pumping millions into the vintage car market, driving up prices of Bugattis, Ferraris and Rolls Royces from yesteryear.
Driven by a passion for French classics
LOS ANGELES // Peter Mullin, owner of one of the world's largest private collections of classic French automobiles, points to a 1935 Hispano-Suiza J12 Cabriolet sitting among 60 other cars in his museum in southern California. "This is the finest car ever made," says Mr Mullin. "At 100 miles an hour, you couldn't even tell the engine was on." The collector is just warming up at his Mullin Automotive Museum, which was designed to evoke a 1930s art deco car salon in Paris.
"I love all the French cars, but Bugatti is my favourite among favourites," he says. "It's the ultimate car in engineering, design, performance." The museum's crème de la crème spins on a pedestal in the middle of the 46,800-square-foot building. In May, an anonymous buyer paid more than US$30 million (Dh110.1m) for this 1936 Bugatti Type 57SC Atlantic, a silver-blue coupe with a raised spine that runs the length of the car.
It's the highest price ever paid for a car, topping the old record by about $2m. The same Bugatti sold in 1971 for $59,000. Mr Mullin belongs to a small club of about 100 collectors worldwide with the money to buy the most expensive classics, says Simon Kidston, a Geneva-based classic car adviser and broker. Rich collectors are an eclectic lot, from comedian Jerry Seinfeld, who collects Porsches and who appeared in a 30-minute cable programme extolling the brand; to Jim Glickenhaus, a Wall Street investor who covets Ferraris; to UK television and radio host Chris Evans, who paid $10.9m in 2008 for a 1961 Ferrari 250 GT SWB California Spyder once owned by the Hollywood actor James Coburn.
A semi-retired founder of a Los Angeles executive-benefits consulting and asset-management firm, Mr Mullin, 69, began buying vintage cars in 1981. He now has 140. "It starts with an interest, turns to passion, then migrates to obsession," he says. Collectors are pumping money into the classic-car market like never before, driving up prices for the world's most famous models of Bugattis, Ferraris, Mercedes-Benzes and Rolls-Royces. Enthusiasts are bewitched by their curvaceous bodies; handcrafted leather stitching; famous owners; and even their possible investment value.
Today, with the stock market in the doldrums, investors seeking hard assets are turning to vintage cars - often for more than $1m, says Keith Martin, publisher of Sports Car Market magazine. "At the moment, important cars are making crazy money," he says. "Baby boomers still have all the money. Half of them are saying, 'I always wanted a Ferrari SWB'." Bugattis, along with Ferraris and Mercedes-Benzes, are the most coveted of the collectibles, based on auction prices. Now made by Volkswagen, Bugattis were originally manufactured more than a century ago by the Italian engineer Ettore Bugatti in Molsheim, France.
The Bugatti 57SC Atlantic at Mr Mullin's museum is, for the moment, the world's most valuable car because only three were made, and only two of them are known to still be intact. The other one is owned by the fashion designer Ralph Lauren. Collectors who buy vintage cars for money, not just for love, face many risks in making a profit. In the opaque and illiquid classics market, they struggle with everything from determining a fair price and finding a buyer to ensuring a seller isn't passing off a heavily repaired model as an original, says Mr Glickenhaus.
Consider the price swings for Ferrari 250 GTE four seaters from the early 1960s. In 1990, the cars were selling for as much as $250,000, up from $30,000 to $40,000 three years earlier, Mr Martin says. The price dropped to as low as $50,000 before recovering to $100,000 in the past few years. "There is a huge business in buying and selling classic cars, and these guys will tell you whatever you want to hear," says Mr Glickenhaus, whose collection includes seven Ferraris. "To the average person, it is not a good investment."
Collectible cars have outperformed stocks, at least in the past four years, according to the Hagerty's Cars That Matter (HCTM) "Blue Chip" Index, compiled by car appraiser David Kinney. The index, which contains the estimated values of 25 of the most popular collectible autos, increased more than 61 per cent from September 2006, when it started, to the end of July. That compares with a 16 per cent loss in the Standard & Poor's 500 Index. The 1958 Ferrari 250 GT California Spyder LWB gained 131 per cent in that period to an estimated value of $3.3m, according to the HCTM index.
David Gooding, who managed auto auctions at Christie's International before starting his company in 2003, expects to sell as much as $150m in cars this year, up from $25m in his first year. "More of my new clients are saying they want a car they can drive instead of a painting on the wall," says Mr Gooding, whose California-based company handled the private sale of the $30m Bugatti 57SC. "We really wanted to be selective and take the best of the best."
The challenge for collectors is determining the value of classic cars in a market where pricing is hard to find. As Dietrich Hatlapa in London built a small collection, including a 1973 Porsche 911 Carrera RS 2.7 and a 1960 Porsche RS 60 Spyder racer, he was struck by the large amounts of money that buyers were paying for classics without having market data to support the prices. With limited pricing data, collectors sometimes hunt for dilapidated cars, hoping to unearth a forgotten gem. In 2002, Mr Glickenhaus says he bought a 1967 Ferrari 330 P3/4 chassis and boxes of its parts from an owner in London, paying a total of about $1m for the car and its restoration.
Mr Glickenhaus says he then investigated the car's history and was thrilled to find that he had bought the famous chassis belonging to a long-lost car that won the 1967 24 Hours of Daytona race. He values the legendary Ferrari at as much as $6m. "I like the story of finding things in the garbage," he says. * Bloomberg