Should you have a classic car in your retirement portfolio?

As someone who has been interested in both the stock market and muscle cars since I was a teenager (my first car was a muscle car), I was surprised to only recently find out there are actual indexes that track the average selling prices of several categories of classic cars as though they were stocks. One of which is the Hagerty Price Guide Index, which is published by Hagerty, an American company specializing in insurance for classic and luxury vehicles. Having a unique insight into the classic car market, they compile valuations based on real-world vehicle sales of more than 40,000 different collector vehicles. From this, they publish and regularly update price indexes of several different categories of classic cars, including Ferrari, Muscle Car, British, German and “Blue Chip”. Being an Investment Advisor, it is hard not to compare these car indexes to stock indexes and make the analogies of Ferrari Index = NASDAQ, Blue Chip Index = S+P 500, Muscle Cars = Dow Jones Industrial Average, and German collectibles = DAX Index

How have classic car values performed compared to stocks?

‍

Seeing the value of classic cars represented like a stock charts is not just an interesting comparison, but also shows some rather similar performance:

• between September 1 2006 and July 1 2024, the Ferrari index went up more than 500%, which is quite impressive, but actually trailed the NASDAQ’s ~700% gain over that same period of time
• during the Sept 2006 – July 2024 timeframe, Hagerty’s Blue Chip Index was up a little more than 325%, which is almost exactly the same as the S+P 500’s gain of approximately 330%
• Industrial stocks have proven to be a better investment than V-8 powered steel though, as  Hagerty’s Muscle Car index is up only around 50% since September 2006, while the Dow Jones average has gained around 260%

‍

‍

While some of the increases in value are surprisingly similar, there has been a significant divergence between stocks prices and classic cars values in the past 18 months. Hagerty’s overall Market Index peaked in January 2023 and has dropped more than 10% since then, while stocks have generally been rallying since the start of 2023, with the NASDAQ up nearly 70% since then, and the S+P 500 up more than 30% in that same timeframe.

‍

How to invest in Classic Cars

‍

Upon learning of the Classic Car price indexes, I initially thought it would be a novel idea (but not a feasible one) to have an investment fund that buys and owns various classic cars. As it turns out, there already are a few investment funds that acquire and hold various collectible cars, as well as other companies enabling “fractional ownership” of expensive classics. While this may allow for an easier and cheaper way to gain exposure to the classic car market, liquidity may potentially become an issue as it is not nearly as easy to sell an expensive classic car to generate cash for redemptions as it is to sell stocks within an ETF or mutual fund.

The more traditional method of investing in classic cars is to actually go out and buy one, then store and maintain it. While this comes with the added benefit of being able to go for a cruise in your investment, it also does come with the added expenses of maintenance, storage, insurance (and gas).

‍

What can we learn from this?

Just to be clear, I’m not recommending anyone go out and buy an expensive classic car as a possible way to fund your retirement. But by all means, go out and buy one if you can afford it and want to enjoy owning one and driving around in a classic automobile.

What this article can do is help you understand some of the new concepts and language in the investment world. For example, an actual classic car that you can buy and own and drive (as long as you maintain it in good shape), can be considered a form of “Alternative Investment”. The funds you can invest in that buy and own actual vehicles and whose value is based on the combined value of those vehicles would be considered a “Liquid Alternative” (or “Liquid Alt”).

Aside from that, if you were thinking of buying a classic car but needed some reason to justify it (or to convince your significant other), you can now reasonably consider it as a long-term investment instead of just an expensive toy.

‍

This information has been prepared by Dennis Rubeniuk who is a  Investment Advisor for iA Private Wealth Inc. and does not necessarily reflect the opinion of iA Private Wealth. The information contained in this post comes from sources we believe reliable, but we cannot guarantee its accuracy or reliability. The opinions expressed are based on an analysis and interpretation dating from the date of publication and are subject to change without notice. Furthermore, they do not constitute an offer or solicitation to buy or sell any of the securities mentioned. The information contained herein may not apply to all types of investors.

iA Private Wealth Inc. is a member of the Canadian Investor Protection Fund and the Canadian Investment Regulatory Organization. iA Private Wealth is a trademark and a business name under which iA Private Wealth Inc. operates

‍

‍