x Abu Dhabi, UAETuesday 25 July 2017

How classic cars can make money

Owning a classic car is one way to stand out from the crowd, and can mean a return on your investment.

This 1939 Alfa Romeo 6C2300B Corto Spider is due to go under the hammer at RM Auctions Arizona sale on January 18. Pawel Litwinski / RM Auctions
This 1939 Alfa Romeo 6C2300B Corto Spider is due to go under the hammer at RM Auctions Arizona sale on January 18. Pawel Litwinski / RM Auctions

As they say, what goes up must come down. It's as true in the world of financial transactions as it is in anything and, while speculators around the world thought there was no end in sight for the huge demand for property during the boom years, that upward trajectory, when it started to freefall, caught practically everyone by surprise.

It didn't really affect me personally as I've never owned a house. But one day I will, and I'm hoping that a different form of speculating will help me achieve my long-term goal of retiring early to some rustic, ramshackle Tuscany farmhouse or Sri Lankan beach villa. Rather than sink money into bricks and mortar or stocks and shares, I intend to buy the right cars at the right time and, crucially, know when to sell them on. Because if you know what it is you're looking at, while the profit margins are usually smaller than when dealing with property, money is still there to be made.

Luxury can be interpreted in many ways. For some of us, it's the ability to wake up every morning and not be stressed about bills or bad weather. For others it could be taking a holiday when and wherever you like, for however long you like. For others still, it's being able to open a garage door and drink in the gorgeous lines of a rare, thoroughbred sports car. No different to possessing a piece of art, whether it's a sculpture, painting, photograph or original piece of sheet music penned by Mozart, owning a rare car can be a most joyous experience. But, like most luxuries, it often comes with a huge price tag.

The appeal is obvious. As cars have, in modern times, become more or less the same in order to appease legislators, most are nothing more than amorphous, androgynous blobs on wheels. Safer and more economical than ever, most are quite dull to look at and to drive. Yet, looking back three decades or more, things were very different - designers enjoyed more freedom to express themselves, often resulting in beautiful, outlandish shapes that would be impossible to legalise in these stricter times. Owning a rare or classic car marks you out as an individual, separate from the masses, and that is always going to be a desirable trait.

But there can be a lot more to it than that because, if you buy the right wheels, you could make a tidy profit when it comes to selling them on to a future owner - something you couldn't say about the vast majority of new cars on sale today. That isn't to say that a new car can't make money. Take the Audi R8 supercar, for instance. When that car was first launched, the world went into a bit of a frenzy - everyone wanted one, yet initially they were in short supply and owners of the first batch of R8s were able to sell their cars for 30 per cent more than they'd paid for them. Six years on, however, and you can pick up those same cars for half the new price because there are plenty out there to choose from - the rules of supply and demand can work for or against everybody.

This R8 phenomena rarely occurs, but new cars that are built in strictly limited numbers will always be a safe bet. The Bugatti Veyron, for instance, is suffering depreciation at the moment because, if your pockets are deep enough, you can still place an order for a new one. Soon, though, the order book will close and production will cease; and when that happens, the values of the 450 cars made will undoubtedly start creeping upwards. Aston Martin's One-77, of which, as its name suggests, only 77 examples were hand made, will no doubt enjoy the same resurgence.

While most classic and rare car enthusiasts balk at the very idea of treating these precious machines as simple commodities with which to make money, that doesn't change the fact that certain models will continue to break world records when it comes to prices paid at auction houses all over the planet. But happily you don't need to be dealing with Ferrari 250GTOs to see healthy returns on your investments.

There's a caveat, however, and that goes back to the opening words of this feature. The vagaries of the markets can change things dramatically and you only need look to the scene in the late 1980s and early 1990s for a sobering cautionary tale. Because in that period of time, rare cars were being bought and sold by traders with only one interest: profit. Buoyed on by a worldwide economic boom, these speculators were looking at anything they could use to make money (sound familiar?) and cars suddenly became hot property.

It was a crazy time and one Ferrari specialist I know in the UK is still seeing cars that bear the scars of haphazard restoration jobs. "A client approached me to inspect a Dino 246 he was interested in buying," he recently told me. "When we started to delve into its history, it had changed hands frequently in the late 80s but on the surface it appeared decent enough. Once we examined the chassis, however, we could see where areas of corrosion had been 'repaired' using Coke cans! That car needed more than the asking price spending on it to make it good again, so our advice was to walk away."

It's just one example of greed getting the better of people who are out to make a quick buck at the expense of others but it would appear that, at least when it comes to classic cars, serious lessons have been learnt. When the economy nosedived in the early 1990s, cars that had skyrocketed in value were suddenly found languishing in the classified ads of newspapers, their asking prices a fraction of what they had been when the going was good, and the market was, once again, one for collectors and enthusiasts rather than the Gordon Gekkos of this world.

It's taken 20-odd years but those asking prices have recovered to the point they once were, and there are many factors influencing this state of affairs. Most of the car manufacturers whose models were sought after in that time are still in business, but these days are much more prolific in their output. Aston Martin, for instance, was only making a handful of cars every year but is now producing almost 4,500. Ferrari, Lamborghini, Bentley, Porsche - they're all making far more cars now than ever, meaning two things: the current cars are unlikely to make money for owners, and the increased worldwide exposure to the brands means that the older, much rarer models, are again in demand.

The same rules as before apply, however, meaning provenance and rarity are important factors. But something as simple as an anniversary can have a massive impact on residual values, as demonstrated by Jaguar's ill-fated XJ220 supercar. A good friend of mine bought one in the UK earlier this year for around Dh700,000. This year, however, was that car's 20th anniversary, which resulted in some long overdue media coverage which, in turn, got the market interested again. Now, just months after buying his rare Jag (only 281 were ever built), you'd be hard pressed to find a good one for less than twice that amount.

Speaking of Jaguar, that company's eagerly awaited new F-Type will commence production in 2013. The first cars will undoubtedly quickly change hands for more than their list prices but there will also be increased levels of interest in the old E-Type models of the 1960s, meaning their values will start to increase. Perhaps it's time to invest in one before the market wakes up and an opportunity is missed.

The world's most successful sports car, the Porsche 911, is also a sound proposition, depending on which model you're looking at. Each generation has its rarities and limited editions, some of which are really beginning to shoot up the price charts. For instance, the 993-generation RS and GT2 models are viewed by many aficionados as the last of the "real" 911s. Air cooled engines, tricky handling and blistering performance are enough to set the 911 fraternity frothing at the mouth nowadays and a 993GT2, which would have fetched Dh600,000 just six or seven years ago, could now easily cost three times that amount. And they're only going to get more desirable and more expensive as time goes on.

Demand for cars like these is now huge in markets like China and South-east Asia - areas where they were never available when new. And that's the beauty of this particular trade: it knows no international boundaries. The UAE, too, will experience something of a classic car boom, especially in light of the government recently changing the rules to make ownership a more attractive proposition. Classic models are now grouped according to their ages, meaning they can legally be used on our roads, although some might have their annual distances restricted or only be permitted to be used in daylight hours, because things like their headlamps and brakes are deemed to be antiquated.

Like property, paintings or sculptures, classic cars are often works of art that happen to be mobile. They can bring their owners just as much happiness, simply by being able to look at them and, on the odd occasion, drive them on some of the greatest roads in the world - and that includes our very own region. That these cars will always, from this point on, be worth at least what you paid for them, is simply the icing on the cake, but take note: as long term investments, they could eventually be worth their weight in gold.