Has the classic car price bubble burst?
After the value hikes of recent years, softened prices have made classics more of a collector’s market again, writes Stuart Johnston
In recent months there has been much talk about classic, vintage and collectable cars not fetching the prices they were a year or so ago.
This follows a huge ramp-up in collectable car prices in the past four or five years, where classic cars were being touted as the best investment on the planet, outstripping the likes of collectable art and property by some margin.
The questions we put to experts was whether prices are in fact down, and whether classic or vintage cars were still to be seen as good to excellent long-term investments.
Brian Noik, of Oldcars.co.za, has been trading in vintage, veteran and classic cars for the past two decades, and is himself a collector of some fine vintage machinery, including a 1913 Buick. "There has definitely been a softening of prices in the past year," he says.
"Speculators have fallen off the boat, and it is being driven by a collector’s market again. There is plenty of interest, but the cars are only selling if they are really well priced, and also if they are top notch examples. Of course, the entry-level classic cars always sell, and on the other side of this coin, the really top stuff always sells. The top Ferraris, Porsches, WO Bentleys [cars from the late 1920s and 1930s], Rolls-Royces, E-Type roadsters, that sort of stuff. There will always be a market for these top-drawer collectables.
"At the lower end of the market there has been movement in Toyota SR5s from the late 1970s, Golf GTis and MGBs and this is great because it is drawing the youngsters into the classic car scene. A lot of these cars are driven by nostalgia, for example the Opel Superboss — a youngster may have had posters of these cars on his wall when he was at school, and now he is hell-bent on finding one."
Paul Kennard, founder of SA’s premier classic cars competition, Concours South Africa, says there are a lot of economic factors that affect both the sales of new cars and classics.
At the top end of the market, prices for new sports cars such as Porsches and Ferraris are high and you won’t make any money on investing in a new exotic, at least in the short term.
"With the older exotics, cars of 20 or 30 years old, it’s all about your reasons for buying it, what you are going to sell it for, and what the rand is doing at the time you want to sell the car.
"And then you couple all that with availability, because there are not that many truly collectable cars in this country. All these factors affect the price and it’s supply and demand at the end of the day," Kennard says.
Is rarity the key to wise investing?
"People collect classic cars for a number of reasons. Some buy them purely for investment purposes, park them and hang on to them as they appreciate in value," says Kennard.
"Globally there are a lot of car collections, but in SA because of the limited number the prices tend to be a little bit higher. You can buy classics overseas but you still have to ship them here and pay duties and taxes. These vary, depending on what the car is. Even old cars attract duties."
Currently these taxes are pegged at about 30% for cars that are 40 years or older.
Kennard, who has traded for a number of years in collectable sports cars, acknowledges that there was a huge spike in classic car prices a few years ago. "The prices of classics went really, really high, really, really quickly. As an example, I bought my Ferrari Testarossa for less than R1m, I had it for eight years and I sold it for R1.6m. I thought that this was great, I had enjoyed the car immensely, put a lot of mileage on it, and owned it for what I consider are the right reasons — which is driving these classics.
"And then two years later, that was suddenly a R4m car! So the prices jumped exponentially. Then prices levelled out for a bit — I’m talking Ferrari particularly here, it’s my sphere of passion — and now they are actually coming down in price.
"There are a lot of factors with any collectibles. You have to do your research, you need to buy something that has value and is likely to increase appreciably in value. This doesn’t apply to all classic cars, so it is important to track the rise in values of a car you have your eye on."
Noik says that in the lower, more affordable end of the classic car market, there seem to be trends that come and go.
"At the moment it is VW buses, or Kombis as we call them, and they have been hugely collectable for some time. A few years ago it was the Citroen DS model that was sought after, before that it was Jaguar Mk II saloons. If a car has been in a movie, you see a huge spike in demand. Now Fiat 500s are sought after."
As far as the investment factor is concerned, Noik argues that there is always a risk of something going wrong on a car that is 40, 50 or 60 years old. But he says if you buy a desirable car, there is always someone else that is going to want that car from you.
Kennard says it is worth pointing out that even if you are going to buy it and park it, there is still some rather intensive maintenance to consider.
"You can’t simply start these cars up every month or so and rev the engine a few times; you have to drive them get the oil circulating, get the exhaust systems up to temperature, work the brakes. They are like horses or human beings, they need exercise to stay healthy, and if you are establishing a large collection, then you are looking at employing a staff of experts to look after your fleet of classics."
What about the sort of classic you should buy? Should you buy the example in the best condition possible, or should you opt for a barn-find?
"It depends on your motivation," says Kennard. "My advice is to buy the best example you can, if that is the car you want. When it comes to restoration this can be very expensive. And restoring a classic is also a thorny subject. First prize would be to buy a pristine, untouched original example, unrestored, because these are the most valuable if they are in good, complete condition.
"Sometimes these aren’t available in the model you are after, so you might need to buy a car that needs some restoration work. Obviously the quality of the restoration work to be done is important, so do your research, get hold of the marque club for your car, ask questions before you spend a lot of money on a car that might need lots of work done, at specialist prices."
The classic car field is diverse, and the definition of what constitutes a classic car varies from year to year, and from community to community.
In recent years there has been a huge run on cars like Volkswagen Kombis from the 1950s through to the late 1970s. VW Beetles of similar vintage are becoming collectible too. Kombi prices went sky high a few years ago, and a perfect example of a 23-window "Samba" Delux bus from the late 1950s will sell for R1m. Prices for the second-generation Bay Window buses range from R50,000 for a scrappy one to R150,000 for a pristine example, a huge ramp-up, considering you could buy them for between R15,000 for a scrappy one to R50,000 for a pristine one just four years ago.
The same trend has happened to Ford Escorts, which in Mk I GT form or Mk II 1600 Sport form are now fetching well over the R120,000 mark.
Cars that are still affordable but are expected to have substantial price hikes in the next few years include the long-nosed Mini 1275 and GTS examples. The reason for this is that all the early-generation round-nose Minis have already been snapped up by collectors.
Many experts predict a rise in prices for the humble, first-generation Citi Golf which appeared in late 1984, early 1985. Mk I Golf GTis in good condition are virtually unobtainable but if you happen on have a pristine Mk II Golf GTi, you can already expect to pay between R100,000 and R120,000, with prices rising rapidly over the next few years.
As for an Opel Superboss, a 1990 cult classic, expect to pay more than R200,000 at least.