Great expectations: Assessing the true value of younger classic cars
In the vast majority of cases, the price trend of a new car is the same. When someone buys a car at a dealership, the value starts to drop as soon as the car is driven off the forecourt. In a year, no less than 10 to 30 percent of the original value can be written off. And after 10 years, the car is worth only one third – or worse, only a fraction – of the original purchase price. The depreciation is caused by the age and use of the car. Sometimes cars seem to rise in value over the years but this can be an illusion of sorts: On the surface it apears the value has risen but adjusted for inflation the value versus purchase price remains the same or even decreases.
Many examples can be mentioned here, including once very expensive cars. An example of this is the Rolls-Royce Silver Shadow. In 1970 the car cost almost £9,300. Fifteen years later, in 1985, a good second-hand car cost around £9,000. With a budget of £15,000 to £30,000, there is now a lot of choice to buy such a classic model. The price of the car has risen in pounds, but adjusted for inflation, the Rolls-Royce has fallen in value. In 1970 the cost of the car, converted for inflation, was almost £150,000. As a used, 15-year-old car, it cost around £27,500 in 1985, corrected for inflation. Now again 35 years later, this classic car costs more or less the same as at the time it was 15 years old.
You will now probably say that this is easily explained. The Rolls-Royce is not a sporty car. Sports cars are much more interesting and therefore more valuable. The most extreme example of this is the Ferrari 250 GTO. A new car could once be purchased for $18,000 and in the following years a used car for less than $10,000. Now the 250 GTO has been sold several times for more than $50 million.
The development of the value of this car was, inflation-adjusted, somewhat flat over the entire period. Those who had wanted to invest in this car with the aim of building up capital had to wait a long time. It was only shortly before 2010 one had to buy a good 35-year-old Testarossa. This example of the Testarossa is illustrative for other cars from Ferrari, Lamborghini and Porsche. Only really special sports cars increased in value more strongly.
On the basis of the development of the value of special 40-year-old sports cars, high expectations are also set for recent special cars. Just like all other modern cars, they usually first drop in value. But after a number of years the turning point is reached. Rather than continue to decline, they rise in value. And that value increase is larger than price inflation. Usually that turning point is reached when the cars are 10 to 15 years old. Some cars seem to be responding to this.