James Mason from accountants Fifth Element talks straight about business

Classic investments
If you think a classic investment is just a pension fund, think again…

It was recently suggested to me that survival is always a positive outcome, if that is true then one might argue that is all that came out of 2011; the world did indeed survive. Yet while international markets troughed and peaked and some of the biggest economies danced a merry jig with double-dip recessions, quantitative-easing, and credit-easing downgrades, there was one oasis of calm. It may not have been where you thought it would be, but the classic car market offered a safe haven for your hard-earned. In fact, it did much more than that.

First we need to look at what measures the financial performance of the market. There are a number of barometers but largely regarded as the leader is the Historic Automobile Group International (HAGI) Top Index which best compares the performance of 50 representative models from around the world
(if you are thinking of investment, it is necessary to be able to reliably track the value of your commodity of choice). The headline news is that the HAGI Top Index advanced 13.89 per cent in 2011. Compare that against the S&P Global 1200, which is a good indicator because it is largely currency-neutral, ended down 7.67 per cent and the FTSE 100 lost 5.5 per cent.

There will no doubt be a few pulses racing among those who have wanted to own an open-top MGB or TR6 but before I have a queue of disgruntled partners outside my office door, let’s be clear that the largely rusting shell of a 17-year MOT failure blocking the driveway for five years is probably not going to perform particularly well. Indeed, the wrong choice of investment can suck the same hard-earned into a black hole money pit faster than a bad day at the races. As with any investment, the quality of choice is paramount; expert advice and guidance will be needed. Let’s face it, you wouldn’t invest in the stock market by sticking a pin in the Financial Times, especially when reading
the food and drink section.

The choice is yours
A quick glance into the world of international classic cars prices in 2011 reveals that Ferraris, which always do well, advanced 10.58 per cent, largely underpinned by a record 1957 250 Testa Rossa that set a £10.2m auction high, but Bentley R-Type Continentals, Mullliner Fastbacks and the BMW 507 also proved themselves to be good investments, and who’d have thought that the Miura SV would be out-performing Daytonas?

The Jaguar XK trilogy has and probably always will see steady growth, with the rarest of them all, the 150 3.8S roadster, now starting to make +£200k at auction. Domestically, sub-£200k, the E-type did very well but then it was expected to in a year that saw its birthday half-centenary.

For the rest of us, the affordable-popular-entry-level classic car realm best bets might be the sub-£10k Shadows and Mulsanes which are great cars. Jaguar XJ V12’s look set to perform well as they become more appreciated for what that they are. £4k can leave money left for petrol, albeit you won’t be able to go far.

In conclusion
Of course, I’m not saying that you should cash in that long-saved for tax-free ISA to put an Aston DB2/4 in the garage. Any investment requires good advice, especially if it’s something like art or wine, but if you know what you are doing or you know someone who does, then you might be able to out-perform the more traditional markets. Let’s leave it at this: you can’t drive a painting, you can drive a bottle of wine but don’t, and against the HAGI Top Index advance of 13.89 per cent in 2011, gold only advanced 9.93 per cent.

Fifth Element is a local Brighton-based accountancy practice offering expertise in all aspects of Accounts Preparation, VAT, Taxation, CIS, PAYE, Tax Planning, HMRC Issues and Business Development.