RE: PH Blog: boom and bust?

[mat205125]

marson said:

whens my CSL going to go up then ????

Patience. It's time will come.

Sadly it'll be a decade or more I would guess, and only really for the trailer queen cars, which defeats the whole object of them.

[sisu]

But there reaches a point within desirable classic cars where people will make one from scratch. These are a few examples of the most desired classics in America. The '32 Deuce, the 64 1/2 Mustang Convertible and the Kirkham AC Cobra. They scanned an original using a 3D scanner. Print it out in a full size model to make the buck or casting/presses. Sometimes putting in thicker steel or changes you want. These are production cars



The Kirkham is better than the original as the '64 AC they scanned was longer by an inch or so on one side. I think Hawk sell them in the UK and Shelby in Texas sell them in the USA. They are still handbeaten aluminium, but better than the originals.


Then there are engines - the 356 4 cam motor, not cheap at £220,000 but a very limited market engine.


That is before you get on to the PurSang Bugatti Type 35s, '32 Alfa 8C

[sleep envy]

sisu said:

But there reaches a point within desirable classic cars where people will make one from scratch.

Can see the logic in that but will they ever be valued at at least the considerable original sale price?

[zebedee]

sleep envy said:

There's no market for thirsty performance cars.

In other news, a 993GT3 sells for over £300,000....

[sleep envy]

zebedee said:

sleep envy said:

There's no market for thirsty performance cars.

In other news, a 993GT3 sells for over £300,000....

Sorry, I should have posted this 'WARNING: THIS POST IS DRIPPING WITH IRONY'

btw, there's not such thing as a 993gt3

[millswe]

DonkeyApple said:

k-ink said:

It's also important to note that things like uber yachts are often bought using complex financial structures based around debt rather than the owner placing physical cash, the reason being to avoid local taxes which can be substantial. If your money is in Switzerland and you are a global non resident for tax purposes then you don't want to be delivering £100m physical into a taxable regieme. So, even if an owner is super wealthy you can reach situations where assets need to be sold to firm up security on a bespoke structured product.

I think thats along the right lines but the debt structure usually has little to do with tax issues. For super yachts, the issue is almost always avoided by flagging the boat in a tax friendly jurisdiction and then having the sale complete in international waters.

That said, you are probably right that people might need to liquidise assets to make sure they have sufficient equity available in the right place to secure the loan, but if that means selling your prize and joy 993GT2 then you are either not uber-wealthy, or are no longer uber-wealthy. Somebody who is selling their car collection is going pop, or doesn't like cars any more.

[TobesH]

Yep! The homologation specials...
BMW E30 M3
Lancia Integrale EVO
Ford Sierra RS500 Cosworth

I reckon the Escort Cosworth has to be a punt. They cost £25k new and the best tiny mileage examples are at that point now. Buy an original large turbo blue top engine example for say £20k and look after it. They have to appreciate, there are so few good ones left...

[CraigyMc]

sleep envy said:

sisu said:

But there reaches a point within desirable classic cars where people will make one from scratch.

Can see the logic in that but will they ever be valued at at least the considerable original sale price?

Already happens.
Lynx E-type? http://www.lynxmotors.co.uk/e-type.asp
CAV GT40? http://www.cav.co.za/
Singer Porsches?

Crosthwaite and Gardiner will rebuild just about anything for a price http://www.crosthwaiteandgardiner.com/

C

[DonkeyApple]

millswe said:

DonkeyApple said:

k-ink said:

It's also important to note that things like uber yachts are often bought using complex financial structures based around debt rather than the owner placing physical cash, the reason being to avoid local taxes which can be substantial. If your money is in Switzerland and you are a global non resident for tax purposes then you don't want to be delivering £100m physical into a taxable regieme. So, even if an owner is super wealthy you can reach situations where assets need to be sold to firm up security on a bespoke structured product.

I think thats along the right lines but the debt structure usually has little to do with tax issues. For super yachts, the issue is almost always avoided by flagging the boat in a tax friendly jurisdiction and then having the sale complete in international waters.

That said, you are probably right that people might need to liquidise assets to make sure they have sufficient equity available in the right place to secure the loan, but if that means selling your prize and joy 993GT2 then you are either not uber-wealthy, or are no longer uber-wealthy. Somebody who is selling their car collection is going pop, or doesn't like cars any more.

Or has a large car collection.

For example, Evans dumped some Ferraris but he didn't need the money, still loves cars but simply saw better value whether financial or personal elsewhere.

[sisu]

sleep envy said:

sisu said:

But there reaches a point within desirable classic cars where people will make one from scratch.

Can see the logic in that but will they ever be valued at at least the considerable original sale price?

Well that all depends on how good it is. The PurSang cars are made in Argentina, by hand, in house. I think they do everything except the guages. Tyres, castings everything. They have to because Argentina has an embargo. But the rest is made as they did when they made the cars originally. Here is a tour of the factory
http://www.youtube.com/watch?v=-infFJgYPqE

Hence Bugatti making this version of their current model in 2009 as recognition of what they do.

[sleep envy]

I don't doubt that it already happens, what do they go for on the second hand market?

[Cheib]

virgilio said:

Here a link to the english translation of the italian article I just published on the matter: http://trusvalt.com/uploads/Oro%20su%20ruote%20-%2...

That's an interesting and well written piece.

If you are really going to look at Classic Cars as an investment though you need to do the analysis looking at other factors. As Chris mentioned in his article the 993 traded for more than the 959 because of the cost of maintenance but also regardless of that all cars cost a decent amount to keep in the condition of say that 993. At that level you have to pay for professional storage, insurance, maintenance/restoration or have the facilities itself....that's all very expensive.

Be interested to know what you think the cost of that is ?

Obviously against that stocks and or bonds do pay a dividend or coupon so that does make quite a big difference. 4% yield a year means an investment returns 50% over a 10 year perid if you reinvest.

You also need to factor in bid/offers when looking at liquidity I think.....that's probably 20% on a classic car aginst less than 0.50% when you are buying stocks in clips of £100,000. If you own a Muira that's worth £400k you can't sell 10% of the car....you can do that when you own shares!

Edited by Cheib on Thursday 8th November 16:21

[Offspeccer]

DonkeyApple said:

millswe said:

DonkeyApple said:

k-ink said:

It's also important to note that things like uber yachts are often bought using complex financial structures based around debt rather than the owner placing physical cash, the reason being to avoid local taxes which can be substantial. If your money is in Switzerland and you are a global non resident for tax purposes then you don't want to be delivering £100m physical into a taxable regieme. So, even if an owner is super wealthy you can reach situations where assets need to be sold to firm up security on a bespoke structured product.

I think thats along the right lines but the debt structure usually has little to do with tax issues. For super yachts, the issue is almost always avoided by flagging the boat in a tax friendly jurisdiction and then having the sale complete in international waters.

That said, you are probably right that people might need to liquidise assets to make sure they have sufficient equity available in the right place to secure the loan, but if that means selling your prize and joy 993GT2 then you are either not uber-wealthy, or are no longer uber-wealthy. Somebody who is selling their car collection is going pop, or doesn't like cars any more.

Or has a large car collection.

For example, Evans dumped some Ferraris but he didn't need the money, still loves cars but simply saw better value whether financial or personal elsewhere.

Whilst Evans is clearly loaded, I am not sure that he is in the same league as the super yacht owners. However, he is a good example of someone who would juggle his car portfolio to land a Fezza that he really wanted. The lucky git.

[Trommel]

sisu said:

Hence Bugatti making this version of their current model in 2009 as recognition of what they do

Pur Sang in Argentina are called that because it's how Ettore Bugatti described his cars, the modern company isn't honouring some blokes in South America because they build T35 replicas.

[George 500]

Any comment which pupports that we are only going one way can only create clear concern that people have decided to ignore the fact that nothing is perpetual. It's interesting looking at old (80s) car magazines with their "Investment Specials". C&SC produced one of those a few months back- plus ca change...?

Having said that I would suggest that the very best cars as objects are still undervalued. When a Cezanne goes for $250m or a Van Gogh for $100m plus who is to say that a 250GTO is not a $100m object or an Auto Union worth significantly more?

What I find interesting about the art market is the gulf between the very best names and "the rest". Furthermore it shows that trying to state that an object is worth what you can derive out of it is clearly academic. A 246 Dino might well be mediocore to drive and a 458 the best thing since sliced bread- but you wouldn't want a modern "improved" Canaletto would you?

I have bought some cars as a use for available funds (sadly not £300k though!) and I hope they do go up in value but do you know what? I just don't care. I don't live in the UK any more and hence I don't drive them regularly so I am perhaps the kind of owner people love to hate.

Having said this an inability to use cars or an ability to pay for them does not necessarily mean that an owner is any less passionate. I am hideously, obsessively and frankly tediously fascniated by cars and think a lot of people who we perceive to just be cold hard investors are the same.

One thing that is VERY different to the 1980s is that it is not just anything with a particular badge that has increased. Ferrari Mondials are still worth buttons and it is not like you need a second mortgage for an automatic Aston V8. At the higher end it is the best that is moving and even at the less rareified section of the market spec is very important. What does all this mean? That buyers are a more educated and interested bunch than previously which creates a much more sustainable value base.

There will be corrections and anomalies along the way but my advice would be that long term this is going one way- if there is something (of a certain age and out production) you want give it a go- it is highly unlikely to get any cheaper and you will kick yourself later if it moves up

Edited by George 500 on Thursday 8th November 19:15

[ES335]

The trick is to know where the bottom of the depreciation / start of the appreciation curve is and then to buy the right vehicle at the right price i.e one that hasn't been ragged on the way down the depreciation slope. Often to achieve that it means buying a vehicle and sitting on it for long enough for it to become classic and start appreciating - and tying up capital while one does that. And to make significant gains, one inevitably has to make a big bet in the first place. It's not as simple as 20/20 hindsight makes it look and as many of the shouldda, couldda, didn't stories here attest. Otherwise we'd all be making a bunch out of it.

[RatLad]

Stuart said:

Anyone can turn up, but you'll need to buy a catalogue to get in, and that's usually around £30. In the case of RM at least the catalogue is a lovely thing - a pretty heavy book full of well shot photography about every car. Some would say that the catalogues are worth half the entry price at least.

Best way of keeping track of them is buy Classic & Sports Car (apparently other classic car mags are available ) and look at the adverts or the auction calendar section. The next big round of sales will be the pre-Christmas sales early in December. However the high points in the auction calendar when the really big stuff comes to sale are really gone for 2012. For 2013 it's worth planning around; January (Scottsdale in Arizona), May (Monaco), July (Festival of Speed), August (Monterey Week), September (Goodwood Revival), October (RM London) with others dotted around these high points.

Perfect. Thank you for the detailed response Stuart

[Cheib]

RatLad said:

Stuart said:

Anyone can turn up, but you'll need to buy a catalogue to get in, and that's usually around £30. In the case of RM at least the catalogue is a lovely thing - a pretty heavy book full of well shot photography about every car. Some would say that the catalogues are worth half the entry price at least.

Best way of keeping track of them is buy Classic & Sports Car (apparently other classic car mags are available ) and look at the adverts or the auction calendar section. The next big round of sales will be the pre-Christmas sales early in December. However the high points in the auction calendar when the really big stuff comes to sale are really gone for 2012. For 2013 it's worth planning around; January (Scottsdale in Arizona), May (Monaco), July (Festival of Speed), August (Monterey Week), September (Goodwood Revival), October (RM London) with others dotted around these high points.

Perfect. Thank you for the detailed response Stuart

Or if you don't want to buy a magazine http://www.classiccarsforsale.co.uk/ have a section on the front page listing up coming auctions.

[RatLad]

Stuart said:

Anyone can turn up, but you'll need to buy a catalogue to get in, and that's usually around £30. In the case of RM at least the catalogue is a lovely thing - a pretty heavy book full of well shot photography about every car. Some would say that the catalogues are worth half the entry price at least.

Best way of keeping track of them is buy Classic & Sports Car (apparently other classic car mags are available ) and look at the adverts or the auction calendar section. The next big round of sales will be the pre-Christmas sales early in December. However the high points in the auction calendar when the really big stuff comes to sale are really gone for 2012. For 2013 it's worth planning around; January (Scottsdale in Arizona), May (Monaco), July (Festival of Speed), August (Monterey Week), September (Goodwood Revival), October (RM London) with others dotted around these high points.

Perfect. Thank you for the detailed response Stuart

[havoc]

Muppetracer said:

He was presented with a £60K bill for that work.....I'm not saying it's right or even justifiable - it's just the way it is.

Exactly the same as the building trade. When the opportunity cost goes up (i.e. buy another car, buy another house), so the cost to restore a car / extend/rebuild a house goes up...completely without regard to actual materials costs, inflation etc. etc.

The building trade throughout the last two decades made an absolute killing off the back of rampant house-price inflation - all the way down to the raw materials suppliers, costs increased well ahead of 'normal' inflation, because they could.



...and so it appears to be in the classic-car world. You could probably build a pattern-perfect replica of a Dino for ~£200k, let alone the £1m+ of some classics.