Insuring A Classic Car
18th February 2019 Jason Harden, Scrutton Bland
With interest rates still low and proving bad news for many savers, some people are now looking for alternative investment options. A classic car might be one option to consider.
A 1962 red Ferrari 250 GTO was recently sold in California for £37million, setting a new world record for a car sold at auction and smashing the previous 2014 auction record of £22.8million for a 1963 model of the same car. Jason Harden, insurance executive at Scrutton Bland specialising in modern and classic motor cars, looks at whether classic cars are a good investment – and the insurance options to consider within this specialist area.
With interest rates still low and proving bad news for many savers, some people are now looking for alternative investment options. Whilst art, gold and diamonds have been seen by some as alternatives to stocks and shares, it is a little-known fact that in recent years some classic cars have outperformed traditional alternative investments.
The term ‘classic’ is a much-discussed point in the car collecting world. Some collectors believe a ‘classic’ to be pre-1978 (which is the current age at which road tax exemption officially kicks in) whilst others believe a classic car is anything 25 years or older. Classic car insurance can apply when a car is over 20 years old. But the one thing that all car lovers agree on is that for a car to truly be a classic, it must be able to prove its worth in terms of design and be a joy to own.
According to the Knight Frank Luxury Investment Index, wine investments went up by 3% in 2017, watches by 4%, coins 10% and classic cars by 28%. I recently quoted for a client’s McLaren P1 (personally signed on the sun visor by Mario Andretti) which was insured a couple of years ago at £12 million but which will now be closer to a £15 million valuation.
A little more affordable are early Japanese sports cars (as long as they are in very good condition), such as a 1976 Toyota Celica, which now costs around £29,000 but which in my opinion will show a healthy increase in value over the next few years.
However, before you dash off to the next classic car auction, there are some important points to consider. Firstly, and obviously, do your research. As with any specialist area of investment, there are pitfalls to watch out for, not least the condition and authenticity of the car at the point of purchase. Whilst a car may be a design classic, it is also old and may require extensive work before it is ready to drive.
Equally, it may already have had significant restorative work which, if of dubious quality, could both damage the value of the vehicle and hide a multitude of other sins. The cost of high quality repairs and restoration can quickly escalate to overtake the rate of increase in the value of the car, so before buying the vehicle, make sure you are aware of any work which is required.
The other big considerations are storage and insurance. Ideally classic cars should be kept in covered, secure conditions, preferably temperature controlled, and it is important to check your insurance policy wording as there may be restrictions which apply - your broker can tell you more.
Your insurance broker can also help you with locating the kind of breakdown cover you will need, and explain the legal costs that are covered with your policy. Think carefully about the kind of driving you will be doing. Classic cars are rarely used as an everyday drive, and your broker can advise on any discounts available for reduced mileage, and also any extra coverage required for special journeys such as driving holidays abroad. Your broker can also check whether there are specialist policies available, for example those which cover both classic and modern vehicles, so that you can insure your everyday and your classic car on the same policy.
Finally, think about whether you need extra insurance options such as key replacement cover and cover for authentic replacement parts – both are obviously major costs for rare vehicles. This is not an area where cheap generic spares will do the job.
This article first appeared in Scrutton Bland’s Adviser magazine and has been reproduced with their permission. Visit their website at www.scruttonbland.co.uk to find out more.