Collector cars outpace hedge funds as alternative investments
Classic and limited-production cars have delivered stronger returns than hedge funds over the past decade, with values climbing by more than 450 percent in ten years.
Classic and collector cars have outperformed hedge funds as an asset class over the past decade, according to figures from the Knight Frank Luxury Investment Index. The index reports a 467 percent rise in classic car values over ten years to March 2016, dwarfing the 7.83 percent return from hedge funds over the same period.
The difference is even more pronounced over five years: classic car values climbed 161 percent, while hedge funds gained just 4.75 percent. These figures put cars ahead of other alternative investments such as wine, coins and art, with only a handful of exceptional sales in other categories matching the top end of the collector car market.
Why rare cars attract investors
Scarcity is central to the appeal. Limited-production models from Ferrari, Lamborghini and McLaren are typically allocated to top clients and sell out before public launch. This artificial shortage keeps values high well after the cars leave the showroom, with some models moving swiftly from retail to auction at a premium. The effect is most visible at the top of the market, but even more accessible classics have seen strong appreciation.
Buyers are not just motivated by financial returns. Ownership of a rare or historically important car brings status and enjoyment that other asset classes cannot match. For some, the car’s provenance or racing history is as important as its investment potential.
Record sales and exceptions
Headline auction results have drawn attention to the sector’s growth. In February 2016, a 1957 Ferrari 335 Sport sold for over €32 million, setting a new record in euros. Not every car achieves such results: a 1968 Ferrari 275 GTS/4 NART Spider failed to meet its high estimate at the same sale, showing that rarity and provenance are not guarantees of a windfall.
Risks and considerations for buyers
While the long-term trend has favoured collector cars, the market is not without risk. Not all models appreciate, and values can fluctuate with changes in taste, regulation or economic conditions. Maintenance and storage costs are also substantial compared to financial instruments. For investors accustomed to hedge funds or stocks, the illiquidity and specialist knowledge required for car collecting are important factors to weigh.
Despite these challenges, the combination of strong historical returns, tangible enjoyment and exclusivity has kept collector cars in demand among investors seeking alternatives to traditional funds.
