Why rare and collectable cars can make good investments
When you think of investing, property and the stock market is what comes to mind most easily.
For those with deeper pockets, art and expensive watches also make good investments.
But not much focus has been put on one specific area, which makes a potential good investment - the rare and collectible car market.
This past weekend, more proof that there is a profit to turn in the rare and collectible car market was on display at the Creative Rides auction at Monte Casino in Gauteng.
One car in particular that fetched a very high price, was a 2005 BMW E46 M3 CSL, which sold for R2 350 000.
With a little over a thousand produced and only 65 finding its way to South Africa, this is one of the most sought after BMW’s in the country, which could give some insight to its ridiculous price.
The model sold at auction was in pristine condition and only had around 26,000 km on the clock, according to Creative Rides.
“The numbers-matching 14/65 with just 26,682 km on the clock that sold this weekend exemplifies the premium that collectors place on low mileage and matching numbers,” CEO Kevin Derrick said.
Another example of this is the Opel Kadett Superboss, which sold for R555,000 at the auction. This is a South African classic, much like the BMW Gusheshe.
Around 500 of the 2 litre four-cylinder racing spec cars were designed by André Verwey and manufactured for the South African market, according to Speed Hunters.
“This hammer-fall record offers yet another example of South African and, of late, international collectors’ passion for limited-edition, home-grown cars, which was evident in the ferocious battle for the Superboss,” Derrick said.
A 1991 BMW 325iS Evo2 sold for R950,000 this weekend as well while a 2007 Porsche GT3 RS 997 sold for R2 million.
Why it works - ‘men never grow up, their toys just get more expensive’
This is not meant to be gender specific, but a majority of the people spending money at these car auctions are male.
And if there is one thing that is common knowledge about men: they do not ever grow up, they just work harder to buy more expensive toys.
This presents an opportunity to enter the world of car investments.
Not just at the level of million dollar art pieces and Patek Phillpe watches, but for whatever your income bracket can afford you, as there is a rare and collectable car for everyone.
From Toyota Twincams, Opel Kadetts to mid and high end BMWs and Porsches, racing model cars have always been sought after for their lore and reputation on the street and race track.
A distinct challenge when considering this investment, arguably, is the fact that you will need to look high and low for an example that is still in a respectable condition, considering the age of these cars.
Cars that are fetching high prices today, like the BMW E36 M3, E46 M3, 325iS and the Opel Kadett Superboss were made in the 1980s and 90s, so you can expect to spend money on getting them back to a clean state.
If you are purchasing a supercar like a Porsche 911 964 Turbo or Ferrari Testa Rossa, you can expect to cough up far more money but also potentially make bigger profits.
Furthermore, cars built in the aforementioned era of automotive engineering will only grow in popularity as the evolution of electric vehicles will make internal combustion engines even more rare, thus driving prices higher.
As companies seek to tone down engine noises and carbon emissions, the sound of a naturally aspirated M3 going full-tilt will be equivalent to Debussy's ‘Clair de Lune’ in the not-so-distant future.
Maintenance cost of car investments
When considering any investment, maintenance costs have to be considered.
If you buy a property for example, upkeep of the property, rates, levies and damages have to be considered, among other things.
In addition to that, the consistent interest rate hikes in South Africa paints a grim picture of the future for those in the property market.
If you enter the stock market, you pay your broker or financial institution’s management fees.
For cars, arguably one of the biggest factors to consider are the restoration costs and storage costs if you don’t have a house with a garage.
If you are setting out to invest in a car, then odds are you can’t be driving it around every weekend and increase the risk of letting your investment go down the drain.
There needs to be some form of disciple on the side of the investor, who will need patience to look at a majestic mechanical beast every day but not drive it.
When considering the temptation, parking the vehicle in an off-site location may be a good factor but security will need to be considered here.
What makes a car investment in South Africa potentially more profitable, is the fact that cars manufactured for the domestic market fetch high prices from overseas buyers, who pay in currencies stronger than the Rand.
Derrick’s auction house often sells South African collectables to overseas buyers, who have them shipped out.
However it’s important to keep in mind that markets can be unpredictable and there’s never a guaranteed return on a specific car.
IOL