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How to invest in classic cars

Mark Lawson

Investing in classic cars is not like investing in bank stocks, or even in paintings or Aboriginal art. A closer analogy may be speculative mining stocks.

Just as the share price of a junior miner will go through the roof when it strikes a major deposit, you may score big profits by picking just the right car to restore at the right time. On the other hand, just as a much more common result with junior miners is for the share price to collapse after it spends all its money on exploration to find nothing, you may find that buying a classic car (or buying a wrecked car and restoring it) was not worth the trouble – at least from a financial point of view.

Added complications are that now it costs too much to hold a car as a collectible in a DIY superannuation fund, and that it’s often not about the money at all.

A long-lost love

A danger facing visitors to the Australian International Motor Show, or the Motorclassica aimed at classic, vintage and veteran car enthusiasts, is that they may sight a long-lost love across a crowded showroom floor.

In fact, according to car restorer Peter Tommasini, only lost love can explain some of the restoration decisions on the cars that go through his Classic Car Restoration workshop in the Melbourne suburb of Bayswater.

“I tell 85 per cent of my clients that a restoration isn’t worth it, but they go ahead,” he says.

One recent restoration cost so much compared with what the car might be worth restored that “the owner must have had his first love in that car”, quips Tommasini.

Anything can happen

Profits are still possible, but there are so many variables and so many different segments that almost anything can happen.

A case in point and an object lesson about this form of investing is that of the market for Australian and American classic muscle cars of the 1960s and 1970s, when men were men and V8 engines delivered a lot of power.

Tommasini says that several years ago a 1971 Falcon GT-HO V8, the classic muscle car of the 1970s, “barely touched by human hands” was sold for $1 million, but now the car’s owners would be lucky to get $650,000.

Gill Skidmore, the owner of Sydney Vintage Car Restorations in the Sydney suburb of Crookwell, says that the muscle car market disaster was probably the result of a shallow market.

Too much money

Buyers with too much pre-GST money were bidding at auctions when the cars came up for sale, and it only required a couple to take a fancy to a particular car to drive the price up. But classic cars as an investment had their place during the global financial crisis.

Skidmore says that clients have told him that when they saw the trouble coming they bought classic cars, meaning the real classics such as Bugattis or Lamborghinis. The cars did not appreciate in value but, unlike investments in the securities markets anywhere, their price did not fall either.

Irrational decisions

Skidmore agrees that many of the purchasing decisions in the classic car market are driven by reasons other than gaining a financial return, such as the investor always wanting to own a particular type of car.

For those who do restore cars, the potential profit depends on the car and vintage chosen. As a guide, Skidmore points to an Austin-Healey 3000 (a British sports car produced from 1959 to 1967 in several variations). One such car in need of considerable restoration may cost $35,000 plus another $40,000 to $50,000 to restore, and then be worth perhaps $100,000.

“That’s not much profit margin,” he admits.

$1 million offer

As an example of a better result he cites a car lover who bought a 1935 Bugatti for $500,000 to $600,000, and spent another $200,000 to $300,000 restoring it. He then got an offer for well over $1 million.

Car collectors with large DIY super funds can still use their fund to finance their hobby, and hopefully make some money as well, but not for much longer. New rules require that from 2016 all collectables held by super funds not displayed for sale or leased to a genuine third party must be stored at a site separate from the principle’s home.

Storage costs for collectables, often put at 8 per cent of the asset value a year, mean that it is no longer worth holding such assets in a fund.

Labour of love

A further complication in these automotive love affairs is that there is more than one type of restoration. In some cases a panel beater will repair the body and maybe install a new motor, but the most obsessive labour of love requires everything to be rebuilt and the new parts actually made in the workshop.

True car love never runs smoothly, however, and can take some strange turns.

Tony O’Donnell, a manager for car auctioneer Shannons, says that trends come and go and purchases are often for lifestyle reasons rather than investment, but the latest preference seems to be for the 1960s Japanese rotary engine cars. These are Mazdas using the Wankel rotary, starting in 1967. Mazda R100s (1968 to 1973) are selling for about $40,000, O’Donnell says .

Sentimental attachment

But as with all other aspects of the classic car market, a lot depends on the car’s condition and even imponderables, such as whether the bidders have a sentimental attachment to such cars.

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