The collector car world was buzzing last week after the sale of a $70,000,000 Ferrari. The sale of the 1963 Ferrari 250 GTO is nearly double the sales price of a different 250 GTO that was sold for $38,000,000 in 2014. Arguably the most desirable Ferrari ever built, the massive sale leads to another question: can classic cars be considered legitimate investments?
By definition an investment is: the action or process of investing money for profit or material result. By looking at the sale of other Ferrari 250 GTOs, this purchase could most certainly be considered an investment. Although the sample size is small, the 50% return outpaces that of the S&P 500 over the same time period. And there are no signs of the classic car market slowing down. Collector car auction houses such as Gooding & Co., Bonhams, and Sotheby’s continue to see growth in their various classic car auctions both in the United States in worldwide.
We’re now even starting to see partial ownership of classic cars as an alternative investment class. Rally Rd. is "a free app that allows members to invest in individual blue-chip collector automobiles with ease. The vehicles on Rally Rd. represent an asset class that has historically outperformed the stock market as well as other alternative asset classes (including gold, fine art, and real estate).” For as low as $50 dollars, users can buy shares, or partial ownership, in high value collector cars. For some, this is an opportunity to own part of a car and live out a dream, they may not have been able own otherwise. For others, this is simply an alternative to buying stocks, gold, bonds, or investing a few hundred bucks elsewhere.
So why classic cars?
Unlike most traditional asset classes, automobiles have an extremely emotional and visceral draw. Owning a classic car allows one to live out a dream by meeting communities of enthusiasts, reliving past experiences, or by simply enjoying rolling works of art. For some, this appeal outweighs the increased risk of owning a tangible item as opposed to something a bit more stable.
So is a $70,000,000 Ferarri a good investment? Well that remains to be seen. But for the select men or women who own a 250 GTO, it's hard to imagine it makes much of a difference.