1. COMPANIES & INVESTMENTS
C
ars are normally purchased as
status symbols rather than for
their ability to deliver a
return on investment, but
like art and fine wine, certain classic ver-
sions of the automobile can offer the
ideal vehicle to diversify one’s portfolio
away from the traditional stalwarts of
equities, bonds and cash.
“In the last year or so, more and more
South Africans are buying classic cars –
especially the captains of industry who
have a bit of extra money lying around,”
says Norman Frost, owner of Frost
Brothers, a classic and vintage car retail-
er in Knysna. “They’re usually boys at
heart who are looking to have a bit of fun
but it’s also about the prestige and nos-
talgia that comes with owning a classic
car. It’s also nice to know that the car
you’ve chosen is going to go up in value.”
Anyone who doubts the ability of clas-
sic automobiles to deliver a decent return
need only look at the so-called HAGI
Top Index, which tracks the performance
of 50 representative rare classic car mod-
els. Developed by Historic Automobile
Group I nte r n at ion a l
(HAGI), a research house
that’s been
compiling the measure since January
2009, the index has risen over 24% over
the past three years.
Of course, as with any asset class, the
trick is knowing what to buy. Certain
segments of the classic car market have
performed better than others.
The Hagerty Blue Chip Car index,
which includes the 1973 Porsche 911
Carrera RS coupé and the 1957 Rolls-
Royce Silver Cloud, increased almost
55% between August 2007 and Decem-
ber 2011. Even more impressive was the
Hagerty Ferrari index, based on models
of
the
famous
Italian
sports car manu-
factured between
1957 a nd 1972 ,
which surged an incredible 68% over the
same period. On the other side of the
spectrum though, the Hagerty index of
American muscle cars such as the 1969
Ford Mustang and 1964 Chevrolet
Impala, fell 34% over that period.
“History and nostalgia are very impor-
tant in determining a car’s value,” says
Frost. “People assign a higher value to
cars that they remember growing up
with.”
For example, Frost says clients hailing
from the Free State tend to have a liking
for classic Chevvies or Mercs. One of the
best Mercs to invest in, he says, is the
1968 Mercedes Benz 280SL, commonly
known as the Pagoda. According to
Frost, the Pagoda’s value has climbed
from around R250 000 a decade
ago to R800 000 currently – a
massive 220% in 10 years.
Frost says another great
investment has been the
Porsche 356, which retailed for
about R250 000 about 10 years
Sunbeam Tiger 260
28 FINWEEK 29 MARCH 2012 FINWEEK 29 MARCH 2012 29
COMPANIES & INVESTMENTS
Classic cars – An underrated
investment vehicle
a g o a n d
now sells
for between
R500 000
and R600 000.
Jaguar E-type
roadsters have
also performed
incredibly well,
with average annual price
increases ranging between R50 000
and R100 000 a year, depending on the
car’s condition. Frost says that E-type
Jags typically retailed for R500 000 to
­R550 000 some 10 years ago and now com-
fortably fetch as much as R1m.
“It’s become a cult car in SA,” says Frost.
“Because of the cost and hassle of importing
cars into SA, there’s a limited supply of cer-
tain high-demand models, and that means
people will pay handsomely for them.”
Still, investors need to be careful as par-
ticular markets don’t value all scarce cars
equally. A perfect example seems to be the
Sunbeam Tiger, which doesn’t do all that
well in SA despite the fact that only 73 were
ever manufactured here. By contrast the
Tiger is in huge demand in Australia.
Alf Dragan, a Sunbeam enthusiast from
Edenvale, says he tried to sell a Tiger 260
in 1997 for R40 000 but was offered just
R20 000 in the local market. He eventually
managed to sell it for R45 000 to an Aus-
tralian buyer who was so keen to get his
hands on the vehicle that he paid for all the
transport costs in addition to the asking
price. Dragan says South African Tiger
owners are today exporting their cars to
Australia for over R200 000.
“It’s all about nostalgia,” says Dragan,
who adds that one of the reasons the Aus-
sies like sourcing their Tigers from SA is
that they’ve usually suffered less rust dam-
Such is the demand for classic
cars as an investment that IGA
Automobile LP has set up a
fund that plans to invest in a
carefully selected portfolio of the
world’s most iconic cars. The fund
aims to deliver returns by purchas-
ing limited production classic cars
and then selling them at a later date
once they have appreciated in value.
The Guernsey-registered fund,
which began canvassing investors
in January 2011, wants to raise as
much as £150m by 2018 by acquir-
ing vehicles like the Ferrari 250
GTO and the Aston Martin DB4
Zagato. Acquisition costs gen-
erally range from £100 000 to
£500 000 a vehicle. None other than
Pink Floyd drummer Nick Mason sits
on the advisory board of the IGA
Automobile fund, which has said it’s
targeting annual returns of 15%.
Another fund set up at the start
of last year is the Liechtenstein-
registered Classic Car Fund, which
plans to achieve annual returns of 17%
per annum and raise €350m over five
years. n
Investment Car Funds
TheTelegraphreportedinNovember
2011 that Warren Buffett, widely
considered the world’s greatest
investor, was offered the Harrah
Collection of cars which included
a 1932 Rolls Royce Salamanca and
a Bugatti coupé of the same year,
for less than $1m. Buffett spurned
the opportunity, only to see a small
part of the collection auctioned off
a few years later for $69m.
Johann Rupert’s
F r a n s c h h o e k
Motor Museum,
housed on the
grounds of
his L’Ormarins
wine farm, is
p r o b a b l y
one of the finest classic car collec-
tions in SA with over 200 vehicles
ranging from the 1898 Beeston
Motro Tricycle to the 2003 Ferrari
Enzo supercar. While it’s tempting
to assume that Rupert has sought to
learn from Buffett’s mistake, Wayne
Harley the curator of the museum
suggests otherwise.
“The majority of the cars in the
Museum do not belong to Mr Johann
Rupert or to the Franschhoek Motor
Museum,” Harley said in an emailed
response to questions from Finweek.
“Other than this fact, we have no
further comment.”
Whoever the collection ultimate-
ly belongs to, it’s fair to assume it’s
worth a pretty penny. n
July 2011 Jan 2012
SOURCE: HAGI
March 2011
HAGI top index
Index value
130
125
120
135
140
145
End March 2011 to end February 2012
Index Performance
% Change
YTD 2.33%
**3 Years 24.25%
Learning from Warren BuffetT’s Mistakes
age over the years than their Austra-
lian counterparts from coastal cities
like Brisbane, Sydney, Melbourne and
Perth.
By contrast, SA tends to have a big
appetite for the 1956 Austin Healy 100
Roadster as well as the aforementioned
E-type Jaguar.
“Those are the real money spinners
over here,” says Dragan.
The biggest risk to prospective
investors he says, is picking the wrong
car, especially one that needs to be
restored.
“Restoring a car today is very expen-
sive,” he says. “If you don’t restore the
right car you can come seriously short.”
Garth Theunissen
gartht@finweek.co.za
Mercedes 280SL Pagoda
Aston Martin DB4 Zagato
Hagerty Blue Chip index
US$
Jan 2010 Dec 2012
SOURCE: Hargerty
Aug 2007
960 000
840 000
720 000
1 080 000
1 200 000
Warren Buffett
Buy classic cars with Jay Leno
Jay Leno, host of The Tonight Show, has
joked that it’s cheaper to have 35 cars and
one woman than one car and 35 women.
That’s easy to say when you consider
that Leno reportedly earns around
$32m a year and has an estimated
net worth of at least $150m. Not
bad for someone who’s the dys-
lexic son of an insurance salesman and a
housewife. Leno’s wealth has enabled him
to accumulate a vast collection of rare and
valuable cars, including classics like the
1956 Austin-Healey 100 BN2 and the 1956
Chevrolet Nomad. Prospective investors
can see Leno’s tips on collecting classic
cars on his website, Jay Leno’s Garage
(www.jaylenosgarage.com).