Fluctuations in the Classic Car Market

The classic car market is a fascinating world where passion meets investment. It's where history's most iconic cars find their value not just in their beauty or engineering excellence, but in their scarcity and the stories they tell. But like any market, it has its ups and downs. Recently, the Monterey auctions, a key barometer for this niche, showed a decline. But is this a red flag or a green light for potential investors?

The Monterey Auctions: A Market Indicator

The Monterey auctions have long been a litmus test for the health of the classic car market. Observers noted a downturn, sparking debates about the market's future. Following the event, data revealed a shifting marketplace. Revenue from the top five auction companies slightly exceeded $400 million, marking a decrease compared to last year's $473 million. The proportion of cars sold, out of 1,225 offered, was 68 %, dropping from previous years rate of 78 %. A healthy market typically exhibits a sell-through rate above 80 percent. Not even leading brands such as Ferrari were immune to this trend. For instance, a 1967 Ferrari 412 P, with a pre-auction estimate of $40 million at Bonhams, only achieved a sale price of $30.2 million. This significant change prompts an intriguing question about the timeliness of investing in classic cars. Let's delve into this further.

However, savvy investors know that such fluctuations can create opportunities. Lower prices now could mean higher returns later as the market rebounds. But what factors could indicate a potential market rebound? Let’s delve deeper into this topic.

The Millennial Demand

Interestingly, the demand for classic cars is from more than just seasoned collectors. Millennials are increasingly drawn to automotive classics and brands such as Porsche, Ferrari, and rare BMWs or Mercedes emerging as favorites. Perhaps it's the allure of analog in a digital world or the sustainability of investing in something built to last. These brands’ blend of timeless luxury and icon status makes them stand out among current-generation cars.

According to a 2024 NY Fed report millennial and Gen Z wealth has grown by 80% in recent years. This demographic is poised to inherit an estimated $68 trillion from previous generations. Additionally, according to Craig Jackson, the chairman, and CEO of the infamous Barrett-Jackson auction, specializing in classic and antique cars, the number of Millennial buyers has increased by an average of 48 percent every year since 2009, leading many to believe that they could become the collector-car hobby's biggest group in the near future.

Understanding Classic Car Investment Indices

To navigate the classic car market, investors turn to various indices. These tools, like the Knight Frank Luxury Investment Index and Hagerty's data, track the market's performance, offering insights into trends and volatility. They're the compass guiding investors through the complex terrain of classic car investment.

The Knight Frank Luxury Investment Index

The Knight Frank Luxury Investment Index provides a broader view of luxury assets, with classic cars being a significant component. It's shown that, over the long term, classic cars have outperformed many other investment categories, demonstrating resilience and the potential for substantial returns. The 2023 report showcases a notable statistic: a 25 percent increase in the value of vintage cars over the last year, making them the luxury asset with the second-highest performance, just after fine art. Yet, similar to other investments yielding high returns, classic cars come with their share of volatility. Their stability is comparable to that of startups, suggesting they carry both significant risks and the possibility of substantial rewards.

The HAGI Index

The Historic Automobile Group International (HAGI), a pioneer in creating indices for classic cars, operates as an independent research organization and think-tank with a focus on the niche market of rare classic automobiles. Since its inception in 2009, HAGI has applied stringent financial analysis methods, commonly used in traditional investment tracking, to monitor the performance of classic cars as an unconventional investment class. HAGI publishes six distinct indices, each dedicated to a different segment of the classic car market.

• “Top Index” is a general index for rare automobiles that incorporates the top 50 most valuable car models on the market.
• “Top ex. P&F” excludes all Porsche and Ferrari from its figures. This can give owners (or prospective buyers) of less popular brands a more accurate picture of the section of the market that pertains to them.
• “MBC Index” tracks only the market for classic Mercedes-Benz cars from between 1920 and 1980.
• “P Index” tracks only the Porsche Market.
• LPS Index” tracks only the Lamborghini market.
• “F Index” tracks only the Ferrari market.

The Hagerty Market Insights

Hagerty, based in the United States, provides specialized insurance coverage for classic and luxury vehicles. This niche focus endows Hagerty with a deep understanding of the classic car market, which it leverages to compile and publish a series of well-regarded classic car indices. These indices, adjusted for inflation, offer a comprehensive overview of the international market. The indices produced by Hagerty include:

• Ferrari: Specifically tracks classic models from Ferrari.
• German Collectibles: Covers classic cars from Porsche, Mercedes-Benz, and BMW.
• Muscle Cars: Focuses on American muscle cars.
• 1950s American: This index covers classic American cars from the 1950s.
• Affordable Classics: This tracks the value of classic cars priced below $30,000.
• Blue Chips: Focuses on the highest-valued cars in the market.
• British Cars: Dedicated to classic cars from British manufacturers.

Overall, all indices published by Hagerty signify an upward trend starting from the post-pandemic era, where the indices dip was highly correlated to the more significant equities market downturn.

Why Invest in Classic Cars Now?

With current market conditions, the timing might just be right. The recent dip in auction prices could be a temporary blip in an otherwise upward trajectory that the variety of indices reflect. Investing now, especially in iconic models known for their stability or growth, could be a smart move for those looking to diversify their portfolios with tangible assets.

Risks and Considerations

Investing in classic cars is not without its risks. Market trends can be unpredictable, and the costs of maintenance and restoration can add up. However, for car enthusiasts and automotive passionates who want to reap the potential benefits, industry experts can help navigate through the maze of collectible classic cars and find investment-worthy classic cars using their wide network and industry insights.

In one of our most recent collaborations with one of the leading car investment experts, the CarCrowd, the Konvi community purchased a 1994 Ferrari 348 Spider worth €95,100

How to invest in classic cars?

Before investing in classic cars a variety of factors and risks have to be considered in order to evaluate whether you have the required resources. While the most obvious factor is the needed capital to fund and maintain your personal car investment, without sufficient information and the necessary automotive expertise, you run the risk of purchasing a car that will depreciate in value, despite being rare. Especially, for older cars that have gained the “Icon” status, finding OEM replacement parts and a suitable mechanic that will handle maintenance and repairs to keep the car running can cost a fortune. Additionally, storing the car in a place that is safe and protects it from the environment, is also a cost factor one has to consider. However, if you have the needed resources storing a car can still yield significant returns, making it a worthwhile investment.

Participating in the investment opportunity a classic car offers does not necessarily mean that you have to fully own it though. Through Konvi, you can start investing in collectible cars starting from as little as €250 and reap the benefits without having to take care of all the responsibilities that would usually follow.

How does it work?

Konvi collaborates with world-leading specialists to ensure you can secure the best investment opportunities considering the most current market trends. After you select the investment opportunity you want to participate in, our experts select the classic car that offers the most investment potential and deals with storage, maintenance, and insurance. After the pre-determined investment period has ended the car is sold to our expert network of collectors, auction houses, or enthusiasts at the highest price to maximize your return. After the sale is completed all the proceeds are distributed to the individual owners of the classic car.

Conclusion

The classic car market is currently experiencing a transformative phase, marked by a slight downturn in sales and noticeable market shifts. This scenario might initially prompt caution among potential investors. However, history has shown that such periods of change often create lucrative opportunities for those with an eye for value. Recent auction results highlight the market's resilience, supported by both high-end classics and more accessible models.

This environment, coupled with growing demand and wealth in regions like East and Southeast Asia and the Middle East, suggests a bright future for classic car investments. The decreasing availability of these vehicles over time only adds to their exclusivity and potential for appreciation. Beyond the financial aspects, the unique appeal of classic cars—encompassing their rich history, exceptional craftsmanship, and aesthetic beauty—presents an attractive proposition for investment. For individuals balancing a passion for automotive excellence with a strategic investment mindset, the present moment offers a prime opportunity to engage with the classic car market.

Note: this article only engages the opinion of its author and does not constitute financial advice.