Classic cars
Classic cars
In November 2023, a 1962 330 LM/250 GTO became the most expensive Ferrari ever sold at auction, going under the hammer for a chart-topping USD51.7 million at Sotheby’s New York. Described as the “Holy Grail of the sports car pantheon”, the car was the only GTO Tipo 1962 raced by Scuderia Ferrari and proved the case that despite a sluggish few years, classic car collectors are back in the game, gearing up to buy once again.
Naturally, owning a classic car isn’t without its problems, especially those that typically arise during the purchase, sale and maintenance of such luxury items. From provenance checks to taxation and succession plans, safeguarding these high-value marques with specialist support should be a priority for all collectors.
The classic car market continues to grow and deliver an unrivalled opportunity to enjoy capital growth with an asset that you love. Always buy because you like the car, but the last 15 years show that with guidance and a mixture of risk and prudence there can be exceptional growth in some marques.
Peter Wallman, Chairman, UK & EMEA, RM Sotheby’s
The ultimate driving machine
When we published the previous edition of this Trophy Assets Guide in 2015, we remarked on the fact that a Ferrari 250 GT Lusso had just fetched USD38 million at auction. At that time, this was a 28% rise in the price of the most expensive car ever known to have been sold.
In May 2022, we had the great privilege to act for RM Sotheby’s on the sale of a 1955 Mercedes 300 SLR known as the ‘Uhlenhaut Coupé’. The car reached a record EUR135 million, making it by far the most valuable car ever sold. It will be fascinating to see if this new record sets the benchmark for the rarest cars in the world, or if the uniqueness of the Uhlenhaut Coupé puts it in a league of its own for years to come.
Of course, aside from the fact that this car sold for a phenomenal sum, it’s useful to understand why it achieved such a premium in comparison to any other car. With a car such as this and others now being worth more than houses, companies or commercial buildings, it’s also appropriate to assess if sufficient due diligence and protections are in place for those eager to buy or sell these types of trophy assets.
Here are a few characteristics and qualities it comes down to:
Rarity – with the SLR being one of only two ever made. The innovation and style of the SLR that influenced the subsequent design of cars and engines made it a completely unique offering.
Provenance – who has owned it and the details of any race history.
Condition and maintenance – albeit that in the classic car world, an unrestored original car in poor condition may have greater value than an over-restored or rebuilt car.
Marque – some car marques are more desirable to collectors, just as a specific artist such as Cézanne, Hockney or Picasso is sought after in the art world.
Classic cars: when issues arise
The hidden legal issues
Some enthusiasts would say that classic cars represent the ultimate trophy asset, combining the allure of a well-known brand (or in motoring circles, the marque) with the mystique of a glamorous provenance. It’s often surprising, then, that when buying such a valuable item, people frequently seek very little legal advice. Who would seriously consider buying an apartment for millions of dollars without getting expert legal and technical advice? It may well be an emotionally driven purchase, but you need to ensure that acquiring the asset is balanced with care and caution too.
As well as the usual administrative steps like registration and insurance, there are some critical legal considerations that aren’t always so obvious in the early stages of buying a car, and that can be all too easily forgotten.
Some of the most common legal issues related to classic car sales and purchases are listed in the following section.
Ownership and title
It is obviously crucial to establish title to a classic car. This is usually done by way of legal certificates, which list the individual or individuals who own the car along with other relevant information related to the registration of the car.
As cars have become more valuable, they are increasingly being used as collateral for loans. Accordingly, ensuring a car has a clean, unencumbered title or that a buyer has protection has become essential. It’s very difficult to know if a car has been charged since there’s no public register to check for mortgages placed over cars, unlike for real estate, where these are visible on the title register.
The risk is obviously higher for more valuable cars and therefore a well-drafted legal sale agreement can provide the necessary protection for a buyer to purchase and obtain a good clean title to the car.
One issue that has arisen on several occasions is where multiple family members have inherited a car, but there isn’t unanimous consent about selling a cherished asset. Similarly, issues can arise in relation to car collections that are subject to freezing or other court orders that severely restrict the right to sell and/or distribute the proceeds of sale.
We’d always advise seeking local advice on how best to transfer title in the jurisdiction of ownership or sale.
The financial appeal of luxury vintage cars lies in their ability to appreciate over time, often outpacing traditional investments. An example of such an appreciation is the Ferrari Dino 246 GTS. The Dino 246 was the first model manufactured by Ferrari in high numbers. It is celebrated by many for its groundbreaking design, and when production of the model ‘stopped in 1973-4 demand was still high'. A 1973 model of this car, initially valued at USD135,000 in the early days of the Hagerty Price Guide, was later sold for
USD635,000
in an online auction, significantly over its estimated value, reflecting the appeal of a unique car model as an investment.
Eight vehicles classic car investors and enthusiasts may like to consider in 2024.
All values are averages of current (Dec 2023) UK Hagerty Price Guide values across all four condition ratings.
Source: Hagerty UK
Provenance
Another key requirement for a classic car purchase is to check its provenance. A classic car will usually have had many owners, and some could have added significantly to its value simply by virtue of who they are – royalty, actors and singers have all added to the value of cars they have owned.
This is not always the case, however, and a seller may unjustifiably seek an enhanced price by referring to a previous ownership. If you encounter different expectations on price, classic car experts will be able to give a clear indication if any additional value should be attributed due to the provenance. Those buying in the UK should also check the Vehicle Registration Mark (VRM) or Vehicle Identification Number (VIN) (the common identification arrangements). It should be relatively easy to discover the history of the car, but it’s important that this process is handled correctly and representations from the seller are verified.
The other element of provenance is racing history, and recent years have seen a rapid rise in the value of F1 and other track cars. Given accidents and changes to cars at races, experts should be brought in to verify serious racing provenance.
Contract specifications
As with any purchase, it’s essential that the parties clearly understand the terms and conditions of the contract, whether buying at auction, from a dealer, or privately.
This may include provisions such as warranties on ownership, delivery specifications and any additional items such as engine parts or memorabilia that accompany the car. Consideration should also be given to import/export duties, VAT, or other taxes.
Ownership structure considerations
As with many trophy asset transactions, understanding how to structure the purchase of a classic car in a tax-efficient way is one of the greatest deliberations. Broadly speaking, for direct purchases, this is likely to depend on where the buyer is a tax resident since some countries offer a number of reliefs and exemptions that can be attractive to the classic car owner.
Other issues include the succession of the classic car and inheritance tax exposure on death. Where these issues are important, more sophisticated ownership structures could be considered – including special purpose vehicles, and trusts or foundations. The correct approach depends on individual circumstances. Many owners choose a corporate structure – using a limited liability partnership or a special purpose vehicle may limit the liability of the owner in the event of a dispute.
Working closely with RM Sotheby’s and some of the world’s leading car dealers and experts, we have an internationally recognised, specialist team that advises on all legal aspects of classic car purchases and ownership, including tax-efficient structures to minimise exposure to sales and other taxes.
Asset performance
According to The Knight Frank Wealth Report 2024, classic cars have risen 82% in value over the past decade.
The key is to ensure you get advice at the right time. Let the experts help you ensure your dream purchase isn’t weighed down with unexpected complications, so you can focus on enjoying owning (and ideally driving) the pinnacle of trophy assets – the classic car.
Key points to remember
- Always check a car’s provenance, ownership and title – including the Vehicle Registration Mark (VRM) or Vehicle Identification Number (VIN).
- Consider ownership structures – it may be more tax-efficient to purchase through a trust or corporate structure.
- Think about succession and how to transfer title in the jurisdiction of ownership or sale.
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Peter Wallman from RM Sotheby’s
