15 March 2018
According to the recently released Knight Frank 2018 Wealth Report, classic cars have increased in value by an impressive 334% over the past 10 years; exhibiting by far the best performance of all the luxury asset classes during this period. While this ascent has slowed in recent years, cars remain an attractive option for many potential collectors.
As a long time classic car enthusiast myself, I know first-hand the allure of historic vehicles. That said, anyone considering this asset class must first give due attention to the practicalities of owning classic cars and how to maximise their value.
On top of my experience as a private client trustee, I have provided collection management and curation services to some of the most significant classic car collections in the world. Here are my top tips for anyone thinking of dipping their toe in the petrol…
1. Do the due diligence
As per all asset classes, there is a need to be vigilant within the car world to ensure that an unsuspecting and keen new collector is not taken advantage of. To ensure the collector is getting what they’re paying for, the car’s provenance and history must be thoroughly researched by an expert. Incorrect credentials can mean the difference between hundreds of thousands of dollars – or even millions – in future value.
2. Buy the best for you
Broadly speaking, the key factors to help determine a car’s future success are provenance, originality, usability, rarity and desirability. However, future classics are becoming increasingly difficult to predict. So to prospective investors I say: buy the best you can afford (making sure its mechanical condition and history are checked). But more importantly, buy the car that you love and will suit your needs – rather than one you think will appreciate. If you want to use it to take your children to school, for example, then don’t buy a ‘fire breathing’ two-seater!
3. Consider ownership structures
High-value assets may be held directly in the name of the individual, but often, as with art and real estate, they are held using a structure such as a trust, company or foundation. Structuring is particularly beneficial from an estate planning perspective, as it allows collectors to assess their overall wealth position by seeing the value of their cars alongside other assets such as quoted investment portfolios, real estate and bank account balances.
Offshore domiciles are popular locations for structuring or restructuring ownership of luxury assets, and well-regulated offshore locations such as Jersey and Guernsey have long been jurisdictions of choice for these structures.
4. Prioritise maintenance
Once purchased, the car’s upkeep takes priority – whether that means basic ongoing maintenance or full restoration. To maintain the integrity of the car, it’s important to engage with the correct marque specialists and other experts. Storage (whether in purpose-built facilities or a warehouse) and storage coordination (if the car travels between shows and museums, for example) are key to maintaining the vehicle. Moreover, storage conditions often form part of an insurer’s requirements.
5. Raise the car’s profile
This includes documenting its racing history, appearances at concours events and inclusion in museum displays – all of which add to a car’s profile and may result in an increase in value.
6. Don’t rush into a sale
After a decision has been made to liquidate a car, or car collection, it’s important to ensure that each vehicle being sold is presented in the most appropriate physical condition, has all the relevant history collated, and is shown at the best events. Further, each car must be properly valued and sold by a suitable broker in a controlled and appropriate way; ideally into a market that has a particular interest in the specific type of car – wherever in the world that may be. Taking this approach will attract a much higher price than selling the collection at a general auction.
7. Leave it to the professionals
When it comes to classic car collection, there is a lot to know. From initial due diligence through insurance, transportation, storage and beyond, it’s fair to say collectors will most likely need an expert hand to hold. By appointing an independent, non-commissioned specialist, every step can be taken care of. You wouldn’t buy a house without engaging your lawyer and surveyor to provide guidance on the contract and title, and the same goes for classic cars. After all, these days the cars may be worth more than the house!
James Haithwaite is a client services director in our Jersey office, working closely with UHNW clients and their trusted advisers to provide expert asset holding and administration services as well as a comprehensive suite of classic car collection management services.
You may also be interested in…
- Classic cars: a foot off the gas?
James discusses the apparent slowing of the classic car market seen throughout the past couple of years, examining current trends and the nature of cars as an asset class.
This article has been issued by First Names Management Limited on behalf of certain companies that form part of the First Names Group. The article has been prepared for general circulation to clients and intermediaries, and does not have regard to the particular circumstances or needs of any specific person who may read it. Nothing in this article constitutes legal, accounting, tax or investment advice.
The information contained in this article has been compiled by First Names Management Limited and/or its affiliates from sources believed to be reliable, but no representation or warranty, express or implied is made to its accuracy, completeness or correctness. All opinions and estimates contained in this report are judgements as of the date of publication, and are provided in good faith but without legal responsibility.
