Investing in luxury cars
Traditionally, classic cars have been regarded as luxury assets reserved for a select few. However, Splint Invest seeks to revolutionise this notion by introducing fractional investing, allowing individuals to own a stake in iconic vintage automobiles without the burden of purchasing an entire vehicle. This model opens new avenues for enthusiasts to engage with the classic car market and enjoy the potential financial benefits associated with these valuable assets.
But okay, what’s so hyped about cars as a passion investment? Why are they seen as an asset?
Classic cars have shown a tendency to appreciate over time, making them an attractive investment option. Limited supply, increasing rarity, and growing demand from collectors and enthusiasts contribute to the potential for capital appreciation. Some iconic and highly sought-after models have experienced significant price increases, outperforming other investment avenues.
The Knight Frank Luxury Investment Index (KFLII), which tracks a weighted basket of 10 collectibles, rose by 7% in the 12 months to the end of June 2023.
Over the last 10 years, as seen below, cars have increased in value by 118%.
Why invest in luxury cars?
A youngtimer is a car that is not yet old enough to be considered an oldtimer (classic car), but it has reached a certain age and is desirable among collectors and enthusiasts. Although there is no fixed definition for what constitutes a youngtimer, they are generally considered to be cars that are at least 20 years old but not yet 30 years old.
Oldtimers, on the other hand, are typically vehicles that are over 30 years old and in their original condition. Antique cars need to be at least 45 years old, although this can vary from country to country. Pre-war cars cover the years from 1919 to 1930.
Such cars are very popular in Europe and North America. Since they are considered collector's items, insurance premiums are usually lower compared to modern cars, even though they can be more dangerous to drive.
High return potential: Automotive investments have achieved an average annual value appreciation of over 11% over the past 10 years.
Rarity: In the past, these cars, which are now in great demand, were built very little. For example, only 1400 examples of the legendary 300sl Gullwing were built.
Market Growth: Statista estimates the global classic car market revenue to be 30.9 billion U.S. dollars and its expected growth to be 8.8 percent annually until 2024.
⚠️ What are the risk factors to consider?
Originality: For the car to carry investment value, its parts should be original factory made. Even the color should still be the original which it was delivered in. It is often difficult to verify the originality of all the parts, therefore it poses a risk if they are falsely appraised.
Market conditions: Following a set of due diligence and market research, investment grade assets are identifiable. Nevertheless, paying the right price for the asset is a challenge and therefore poses a risk of acquiring the asset at a price premium.
High maintenance cost: Old and rare cars need especially good care to stay in good condition. Spare parts are expensive and difficult to find, moreover, an authorized mechanic must take care of the work, which can be costly.
Investment case: As it is with physical assets, fees and taxes apply. The higher the value of the asset, the higher these costs are. Hence when purchasing, the potential income should exceed such costs for the investment to be valid.