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April 18, 2012 at 06:17 AM
Where are people storing their wealth these days? Given the tumultuous market for alternative investments and low bond yields since the start of the financial crisis, any place where they perceive it to be lower risk and they can be assured of a return on their investment. That means the wealthy continue to invest in art, jewelry, antiques and other collectibles.
We do not offer investment advice at Chubb (though some experts do). But as an insurance provider for those with valuable collections, we pay attention to trends in the marketplace.
One asset class that is often overlooked is collectible cars.
The wealthy invest in hard assets like the “classics” for a number of reasons. First, classic cars often appreciate in value, and when they depreciate, it’s not by much. Second, there is a thriving secondary market in the form of live auctions and online markets, which ensures market liquidity. Next, like art, jewelry and wine, collector cars are easily insured, unlike most soft investments. Finally, and perhaps most important of all, you can drive them, which is fun—and frankly, after the last few years, investing could use a little fun.
Recent collector car auction data (provided below by Sports Car Market magazine) shows that the faltering worldwide economy is having little impact on the classic car hobby.
| 2010 |
2011 |
|
| Cars Offered for Sale |
22,282 |
25,431 |
| Cars Sold |
14,797 |
17,090 |
| Sell-through rate |
66% |
67% |
| Total Sales |
$815,103,418 |
$937,746,047 |
| Average $ per car |
$55,086 |
$54,871 |
| Auctions Covered |
112 |
111 |
| Average Sales per Auction |
$7,277,709 |
$8,448,162 |
Total sales in 2011 were 15% higher because more cars were sold, which, in and of itself, is a reflection of market strength—more supply became available in response to increasing demand. In each category above, the numbers have risen, except for the average price per car, which dropped slightly from 2010 to 2011.
Even with the drop in average price, car collectors continue to pay record prices for the best-of-the-best. For example, at the 2011 Pebble Beach auction in August, we saw two new records set. The first was for the highest price ever paid for a car sold at auction—a 1957 Ferrari 250 Testa Rossa Prototype for $16.39 million, below:
Image copyright and courtesy of Gooding & Company.Photo by Pawel Litwinski.
