Veteran car as a valuable investment
Generally speaking, the value of veteran cars is constantly increasing, especially in times of economic crisis. During the pandemic and now, in 2022, in the midst of the Russian-Ukrainian war, some models have seen value increases of over 40%, but the average is around 30%. This trend is still continuing, with the increase in the value of veteran cars continuing to accelerate and well above the rate of inflation.
There are several reasons for this. Vintage cars are a finite commodity, their quantity diminishes over time, they wear out, fewer and fewer can be salvaged or are left in their original condition. The steady decline in the number of oldtimers (over 30 years old) and youngtimers (over 15 years old) available for purchase is also due to the fact that people who acquire a nice car they like tend to value it highly and therefore, because of its increased value, no longer sell it on.
The current growth in the value of vintage cars is well above the rate of annual inflation and far outperforms other investment opportunities such as bank deposits, shares, real estate, and significantly outperforms gold (gold-based investment trusts), which is considered by economists to be the most crisis-resistant, as well as fixed-rate bonds and government bonds with inflation-linked yields. In the money and capital markets, achieving returns of just a few percent is considered a major achievement, and investing in excess of inflation by 15-20% is virtually unheard of.
Moreover, the appreciation is still in its early stages, the most popular cars from the 80s and 90s and in some cases from the early 2000s, although in declining quantity and quality, are still available, affordable and, based on the experience of the past 15 years, will increase in value by leaps and bounds in the coming years. The price of these vintage cars can quickly double and, based on trends, there is no type of car that is not expected to increase dramatically in value in the near future. Many people think that the best-looking cars were built in the 1980s and 1990s; nonetheless it being a matter of taste – although it is easy to agree with – but what is important is that their performance and technical sophistication mean that they are essentially still very usable in today’s traffic conditions, and that they are typically more fun to drive than today’s cars and can be used comfortably for shorter or longer journeys.
And this is the other aspect that for many people is even more important than the increase in value: the significant emotional experience that comes with owning and using a vintage car and the constant enjoyment that comes with it, so while the value of the investment goes up by an average of 30% (40% or more for some models) per year, the enjoyment of using, driving and driving your favourite car is still an excellent and unique experience. Whether it’s a Mercedes, Porsche, BMW, VW Beetle, Trabant or Bentley, all cars have a unique driving experience. Here, everyone will find the character that suits them.
For the latter, those who “oldtimer” for love and nostalgia are doubly satisfied: while living their dreams, they also benefit financially.
This is confirmed by the academic literature and the media, with some examples from recent press articles:
According to an article in totalcar.hu (titled “Vintage cars hold their value better than gold, as an investment”):
“There is no security, precious metal, china frame, let alone company stock, that has shown such stability in the last ten years. It’s about the vintage car, which used to be a hobby for the crazies, but is now one of the most secretive top tips in the investment market.”
According to the article, during the last crisis (2007-2010) the economy collapsed and all investments suddenly became worthless. Anyone with money invested in anything they could, as long as it wasn’t paper or real estate. This wave of flight from traditional investment assets met another, and rather than extinguishing each other, they amplified each other. This other wave was the nostalgia movement (retro trend), which was then slowly but had been unfolding for decades, and which still exists today and is spreading to more and more areas of life.
Until 2012, analysts believed that vintage cars, as a new form of investment, were keeping pace with movements in the value of gold. Then gold took off, but the vintage car continued to soar through the rest of the crisis and beyond. All of this has made it one of the most stable investment vehicles in the world.
According to the popular autostart.hu in its article titled “Scary price rises for young- and oldtimers? Again?”:
“It’s like that nowadays, when there’s a crisis, the prices of old cars go up. It happened with the dotcom crisis in 2000, it happened two years after the great credit crunch of 2008, and it looks like it will be the trend during and after the current crisis.”
A report based on extensive data collection calculates that older car prices are rising at an annual rate of 35 per cent, an increase that exceeds the results of the very dynamic period around 2007.
To quote to an article in Manager Magazin, “Lada or Trabant for five thousand euros”:
“The average price of vintage cars has been rising very steadily since the crisis, more than gold. The domestic market is also expanding rapidly, with more and more and more expensive oldtimers on the road. The world of high-value vintage cars has long been a hobby for the most affluent, but in recent years investors have also seen the opportunity. According to analyst firm Knight Frank Research, cars still offer the greatest returns in the luxury goods sector over five to 10 years.”
In Hungary, the museum status of vehicles over 30 years old has several advantages. The owner can take out motor third party insurance at a discount, the car is exempt from performance, company and luxury taxes, and if imported from abroad, it does not even have to pay registration tax, and as one of the most important conditions for oldtimer classification is that the vehicle must be original, no environmental test is required. Investors can therefore save money and benefit financially from the certification.
According to the investment website penzcentrum.hu, “Money is flowing instead of oil”:
“Everyone should think about what he or she wanted most as a child: if not a Maruti, but something as sporty as a Peugeot 205 Rallye, Opel Kadett GT/E, BMW M635Csi or Ford Mutsang Mach I, then there can’t be much harm in it, because others are exactly the same. With a car like this, you’re guaranteed to have a value investment – where the return is not in forints, but in adrenaline.”
Should we buy a car or a restored car?” asks the article, and the answer is that what we have learned from the furniture market is that the cost of restoration is not always recovered by the increase in value of the artwork. However, we will see the value of our treasure in the money we have spent on our car. So, apart from the cost of the research, the condition of the object of our investment is not the most important factor in the final result.
Finally, in the trade magazine Oldtimer Autó, among others, you can read the following under the title “A profitable investment”:
“There is a good chance that within 10 years the share of electric cars in the West will be around 50%, and in the longer term, cars with internal combustion engine like two-strokes will disappear completely from Eastern Europe. In the classic car market, the cars that will really make a difference will be those that already have the characteristics of more modern cars but are old enough. I’m thinking of cars with a roof, comfortable suspension, air conditioning, larger capacity, maybe even sporty.
The good news for car buyers is that before the electric car boom, you can still get older cars at relatively affordable prices. I write older because it doesn’t even need to be over 30 years. Youngtimer cars are the ones that will become oldtimers in a few years, which in many cases will immediately jump their value upwards of €10,000. In addition, there is a choice of 20-25 year old cars in good condition, which are currently affordable. We may also choose a car in need of restoration if we are ambitious about it. An oldtimer car is an investment that while the price goes up, you can enjoy it every day, what more do you need!”
In conclusion, while they are fun to drive, the trend of increasing value of vintage cars is expected to continue in the coming years, and certain circumstances may even accelerate the process.