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The following is a picture of a car.
Specifically, it’s a picture of a Mercedes-Benz 300SLR Uhlenhaut Coupé.
It’s got a unique story.
Rudolf Uhlenhaut was a British-German engineer who designed racing cars for Mercedes-Benz. Inspired by Formula-1, Uhlenhaut designed the 300SLR Coupé in 1955 to be lightweight and quick.
Exactly 2 were produced.
With a sleek design and impressive specs, the car’s racing debut was highly anticipated by the public.
Unfortunately, that debut never came.
After a tragic accident in Le Mans, France which saw a car crash into the stands and kill 82 people, the Mercedes-Benz racing team retired from racing for the next 34 years.
The supercharged 300SLR was shelved forever.
Now, given its history – what do you think the Mercedes-Benz 300SLR Uhlenhaut Coupé is worth?
A million? Ten million? Dare I say…a hundred million?
The answer: $143 million
At least that’s what it went for at auction last year, making it the most expensive car ever sold.
Today, in <5 minutes, we’ll cover an asset class that outpaced nearly all others of its kind last year – classic cars:
What makes a car “classic”?
Key factors to consider
Pros & Cons of investing in classic cars
Resources & points of access
What makes a car “classic”?
That’s a question to which there’s no universally accepted answer.
Industry definitions vary, but as a rule of thumb – you know a classic car when you see one.
More specifically, most collectors’ organizations and insurance companies generally agree that to be considered “classic,” a car must be at least 20 years old and contain some sort of historical interest.
The tragic tale of the 300SLR’s shelving is a prime example.
A classic car must also be in good working order and be true to its original design, which is to say it should be free of excessive modifications.
Getting a bit more nuanced, classic cars can be further categorized depending on their characteristics–primarily, their age.
Again, there are no universally accepted definitions, but typically they will fall into one of three buckets. We’ll lean on the American Collectors Community for the parameters here:
Classic → manufactured in 2000 or earlier
Antique → manufactured in 1975 or earlier
Vintage → manufactured between 1919 and 1930
Remember though, age is just a number. Without any historical meaning, it means nothing.
After all, nobody is looking at a 1997 Ford Aspire–with its boring design and reputation for low-quality performance–and thinking, “I gotta have it”.
Consider instead a 1990 Acura NSX–which had design input from Formula One legend Ayrton Senna and featured groundbreaking innovations–and things change dramatically.
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Key factors to consider
Just as collectors of art, watches, and other luxury items–or “passion investments”–prize rarity and uniqueness, classic car investors similarly value a vehicle’s singularity and scarceness.
The 300SLR at the top is, once again, a prime example of these qualities: its design was bold and there were literally 2 made.
The Ford Aspire and Acura NSX offer more realistic examples for each side of the spectrum.
The latter had relatively low production numbers compared to other cars from its era and a focus on quality, whereas the former was mass-produced and cheap.
These factors (rarity and uniqueness) are typically binary in nature (i.e., it’s either classic or it’s not).
Similarly black and white–and equally important–is a car’s condition and authenticity.
Is it in need of repairs or ready to hit the road? Are the parts original or has the car been restored? If so, how extensive was the restoration? What are the modifications? Are there many?
These are questions a classic car investor needs clear answers to.
Finally, there’s the matter of the vehicle’s historical significance.
While the previous factors serve as useful qualifiers, a car’s story can often be the biggest factor in driving its value.
James Bond’s 1964 Aston Martin DB5…
…Ferris Bueller’s (or rather, Cameron’s dad’s) 1961 Ferrari 250 GT California Spyder…
…Bo and Luke Duke’s 1969 Dodge Charger…
…every hippie in the 1960s’ Volkswagen Beetle…
Cars associated with popular movies and TV shows and societal movements like these carry a cultural relevance and nostalgia that makes them desirable to collectors and investors.
As such, they command the highest values.
Pros & cons of investing in classic cars
If you’re looking to invest in classic cars, your returns are predictably going to vary wildly based on the cocktail of unique factors we mention above that drive their value.
With that said, they do represent an opportunity for attractive returns.
According to a 2022 Knight Frank report, the value of classic cars as an asset class increased 400% from 2005 to 2021.
Over the same period, investing in the S&P 500 would have yielded a 356% return (and that includes both capital gains and dividends reinvested).
Classic cars also represent tangible assets–you can touch them, drive them, and admire them. Like other luxury assets, this means they offer the potential for enjoyment in ways stocks and bonds never could.
The fact that their value can largely be driven by nostalgic factors is a double-edged sword.
On the one hand, an investor could easily overpay for a car if they are emotionally attached. On the other hand, the longing for what the car represents provides a constant tailwind for demand (and consequently prices).
Also important to consider is that classic cars are heavy pieces of (old) machinery. This means they often require hefty maintenance and repairs which can be expensive and even require specialists.
And of course, there’s always the possibility of damages (even a minor fender-bender can be very costly) or a carjacker channeling their inner Gone in Sixty Seconds and stealing your pride and joy.
Resources & points of access
As with other luxury assets we’ve covered here at GritALTS, classic cars are an arena in which it pays to be an enthusiast.
Deep knowledge of cars (from nuts and bolts to history) represents a major advantage.
With that said, there are a few routes to take for those interested in investing in classic cars.
The first is through direct ownership which is most easily achieved through auction marketplaces, and of which there are many options. Here are a few:
For those unwilling or unable to pony up tens or hundreds of thousands on a sweet set of wheels, fractional ownership platforms offer an alternative way to gain exposure to the asset class, though the options are more limited:
Wrapping up…
No, I can’t provide you with an absolute definition of a “classic” car.
But I can point one out to you when I see it.
Classic cars represent a unique, viscerally enjoyable, and potentially lucrative asset class.
In fact, it ranked as the second-best performing luxury investment in 2022, according to Knight Frank:
For investors – rarity, condition, authenticity, and historical significance are the key drivers to consider.
As such, being plugged into car and pop culture as well as auto trends should be considered a prerequisite for market participants.
Before putting the pedal to the metal, it pays to do your homework.
As always, DYOR (do your own research)!!
Until next time…
-Genevieve Roch-Decter
