JUL 15th 2015

Edward Legge ‑ Don't give in to temptation

Are classic car owners currently existing in a metaphorical Garden of Eden? In terms of values they have never had it so good and the scene is booming – restorers are flat out, events are packed and the choice of cars available has never been greater. The Garden of Eden is getting crowded though and it’s all because a certain resident is tempting people in by hissing one simple word – invesssssstment…..

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Hackles will be going up already, but it is an issue that the industry needs to address. Selling investment is strictly regulated in the UK and for good reason – it prevents unscrupulous individuals and organisations from taking advantage of people’s natural desire to improve their situation. The other thing it affords those individuals is recourse if they feel they have been miss-sold that investment and there are already claims-management organisations operating in this area. If you sell something clearly labelled ‘sure to be a good investment’ in the course of your business without all the usual disclaimers and it turns out not to be you could be leaving yourself wide open.

We’ve looked at classic car investment and speculation in the past, so what has prompted yet another blog post on it? Well, the talk of investment in the Garden of Eden has reached fever pitch in the last couple of months, more and more people are being tempted to take a bite out of that apple because of the current rhetoric in the classic car market. How do we know this? Because at Classic and Sports Finance we are taking more calls about investment than we are about cars and, even though we are a licenced and regulated business, we are definitely not financial advisors and have no aspirations to be such. Cars are now ‘assets’, trading cars privately is now ‘investment’, a ‘collector’ is anyone who keeps a car for a few months and sells it (I thought the whole point of collecting things was to actually keep them) collections are “portfolios” etc. etc. It may be amusing for real car people to chortle at the prices being asked for some cars – £120,000 for a Sierra Cosworth, anyone? – but the reality is that some of these cars are being bought by non-car people looking to make some money because they were told it was a good investment…..

‘The talk of investment in the Garden of Eden has reached fever pitch in the last couple of months, more and more people are being tempted to take a bite out of that apple.’

Let’s be quite clear here – and some people will disagree – I do not believe that prices will come crashing down. Values of some cars continue to rise whilst others stagnate. In fact, many very astute and knowledgeable classic car enthusiasts see classic cars as a safe place to put their money which is the reason prices began to go up in the first place – and they still do. The big difference is that those people buy the right cars from the right people at the right price. If you take some time to think about it, going out and buying the ‘cheap’ eighties Ferrari that the cat dragged in probably isn’t the best investment strategy (#notafinancialadvisor), so don’t listen to Hissing Sid and his boiler room chat. It just isn’t that easy.

As an economist at Bloomberg said about the situation in China which has hit their small investors: ‘We’re happy to let market forces work on the way up. On the way down, we’re not so happy.’ What will happen if those promised returns don’t materialise?

Edward Legge is Director of Commercial Development at Classic & Sports Finance

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