► Investment funds are scouting cars we love► Regular folk might make money from motors…
► But at what cost?
What madness is this? A rare hot-hatch gains £8,000 in value in nine months, and when it finds a new buyer the profit is shared by 1000 people. Everyone’s a winner?
Maybe not. Because it means modern classics are moving further away from the budget of most car enthusiasts. Let me explain what’s going on, and why it matters.
At a time when interest rates are at rock-bottom, many people are looking at investments as a way of beating the banks/sheltering from income tax, depending on your viewpoint. Asset management company, Hargreaves Lansdown, even reckons it has 69% more Isa millionaires now than it did in 2020. Apps are cropping up, Bitcoin is being mined, Athereum is probably something.
Using cars as investments used to be the preserve of the uber-rich. People who had hermetically sealed car caves where they could simply leave a Jaguar E-type for 20 years waiting for it to appreciate were generally only a very privileged few – Eton graduates, steel magnates and the like
But there’s something new on the horizon. Fractional investment funds are promising to bring investments to people of normaller means. It’s easy to understand. It basically allows ‘investors’ to buy partial shares in something, rather than owning it outright. In this context it means buying part of a car, rather than the full car. If it’s sold for a profit, investors then reap the rewards.
Recently a fractional investment fund called the Car Crowd paid out a 32% gross return after nine months on a 2002 Renault Clio V6. I spoke to its CEO, David Spickett. He’s a real car guy and now employs four staff members to look at up and coming cars, buy them, and then sell shares with the aim of making people money.
The CarCrowd bought that Clio (above) for £28,000, took a curation fee of £2,000, then sold 1000 shares at £30 each. It was then sold for £38,000. Everyone’s a winner.
Well, except for the cognoscenti without cash. Like many enthusiast cars, the Clio V6 has a brilliant story behind it. Renault was looking for a flagship Clio to sit above the Renaultsport models. Designer Axel Breun had been sketching a Twingo body on a Ferrari 308 shell. So when these ideas came together, a mid-engined Clio was born. Complete brilliance and lunacy.
But do you think anyone sat down at any point and said: ‘I really hope someday someone will be able to own 0.001% of one of these’?
Spickett told me his team is specifically looking for modern classics. Stuff under the radar that can be sold for more money. Stuff that we, normal enthusiasts with normal means, like and buy. Think £7,000 BMW 550i, £10,000 Porsche Boxster and £20,000 Maserati GranTurismo.
What happens if all these cars are getting bought up by investment companies flush with investor’s cash? Even if you do fractionally invest in a car, you don’t get to drive it. That’ll make the car lose money of course.
Chuck in the regular collector/car-dealer and the supply/demand algorithm is moving away and out of the reach of the car enthusiast. In true 2022 style we have a new crisis.
Do you agree or disagree with Murray? Let him know in the comments below
Keyword: Fintech is coming for the car enthusiast