Investing in Oldtimer: Bringing more Momentum to your Portfolio.

Imagine that: you get in. The smell of ripened leather rises directly into your nose when you open the driver’s door. The seats are elegantly shaped, and the design of the vehicle is stylish. The car lies elegantly in the curves, while serpentine by serpentine it climbs an alpine pass. In the film “Skyfall”, James Bond once again shows us how smoothly a legendary “Aston Martin DB5” can move.

Kapilendo AG
Jul 16 · 5 min read

Imagine that: you get in. The smell of ripened leather rises directly into your nose when you open the driver’s door. The seats are elegantly shaped, and the design of the vehicle is stylish. The car lies elegantly in the curves, while serpentine by serpentine it climbs an alpine pass. In the film “Skyfall”, James Bond once again shows us how smoothly a legendary “Aston Martin DB5” can move.

In recent years, rare cars have proven to be more than just a feast for the eyes and experience for the owners. Classic cars can also be an exciting alternative to classic investments in stocks, bonds, and real estate.

Fun Fact: During the “Car Week” in Monterey, California, in the fall of 2018, 1,400 cars were auctioned off on three evenings for a total of 370 million dollars.

Sounds tempting at first. But what exactly makes this asset class so interesting and where are there potential risks for investors?

Oldtimers versus shares and gold. Who will win the race?

The Oldtimer Index (DOX) tracks the performance of 88 models that are most frequently represented on the German market. The historical trend shows that the index grew by an impressive 302 percent between January 2005 and January 2018 (or 11,2% p.a.). By comparison, the DAX grew by 95 percent (or 5,3% p.a.) over the same period (see chart opposite side). The development during the 2008 financial crisis is also interesting. The DAX has shown a significant slump, while the performance of vintage cars has been proven to be quite stable. Gold, on its side, played its role as a safe haven, outperforming both assets classes during the financial crisis. However, its price evolution since peaking in 2012 has been less favorable resulting in a performance of 149 percent (or 7,3% p.a.) between January 2005 and January 2018.

The market for oldtimers in Germany is growing continuously.

Germans love oldtimers. Over the past 7 years, the number of registered vehicles with H-plates has grown constantly — to over 422,000 in 2017. The most popular models are still the Citroen 2CV (“Tortoise”) and the VW Bus T2 (“Bulli”). In general, Germans are loyal to the domestic manufacturers of classic vehicles — a large proportion of the registered vehicles are made in Germany.

Oldtimers as an investment? The investor “must” take the wheel.

Is it enough to buy a vehicle at one of the countless classic car auctions, drive it home, park it in your own garage and sell it again after a few years?

The simple answer: no. Investors must bear in mind that oldtimers cannot simply be left lying around like stocks while hoping for a positive performance. Experts recommend driving at least 1,000 kilometers a year in oldtimer so that the cars do not suffer any damages. This is not a problem for most people. They see this driving time as a kind of “dividend” on four wheels. In any case, the owner should ensure, that this minimum yearly mileage is always adhered to.

Not to be underestimated: even parked cars have running costs.

In addition to the time expenditure, other expenses such as storage space, taxes, maintenance, expert opinions, and insurance all represent expenses which investors must consider in order to assess the financial benefit of an investment in classic cars.

The resulting costs can reduce the expected net yield considerably. Since the listed costs are predominantly fixed costs, which apply to all models, experts recommend only investing in vehicles from a value of at least 100,000 euro. The higher the value of the classic car, the lower the weight of the pending fixed costs. This has a positive effect on the return on investment.

Another theoretical risk is the legal restriction of the use of classic cars. The current discussion about diesel driving bans in city centers can be interpreted as a clear signal for a turn towards environmentally friendly vehicles. Buyers of classic cars should not ignore political developments for these reasons.

Blockchain and oldtimers. Is the big market opening coming now?

Investing a large amount in a single asset class discourages many investors and should be avoided from a risk perspective even if the asset markets shows sufficient liquidity. However, making only a partial investment in a classic car has been proven to be difficult so far, as it is currently difficult to own only fraction of a vehicle. At least not without significant effort. A solution which will come soon and on which we work purposefully: the tokenization of material assets (“asset tokenization”).

Through asset tokenization, the ownership rights to tangible assets are mapped digitally in so-called “tokens” on a blockchain. For example, an oldtimer worth 100,000 euros can be divided into 100 oldtimer tokens. In the future, these can be traded on the secondary market via trading platforms. This allows investors with lower liquidity to open their portfolio for a new asset class and to benefit from increased portfolio diversification. In this sense, blockchain may offer a rejuvenation to the Modern Portfolio Theory and will allow investors to build truly diversified financial portfolios.

wevest final words. Between passion and reason.

Alternative asset classes are in great demand in the low-interest environment and are enjoying growing popularity. This trend is reinforced by turbulent phases in stock markets around the world.

Apart from that, alternative investments are a sensible addition to the personal portfolio, taking into account the individual opportunity/risk profile. The fact that the prices of luxury goods such as oldtimers, paintings, and other assets hardly correlate, if at all, with traditional asset classes means that there are interesting opportunities not only for private investors but also for institutional investors.

Here, too, we advocate the philosophy of diversification according to Markowitz, because:

“Diversification is the only free lunch in investing.”

Modern technologies such as asset tokenization will simplify this process considerably in the near future. It will be exciting. We will keep you up to date.


About the Author

is currently Head of Product at the wevest Digital AG in Berlin and responsible for running the Blockchain Department.

Kapilendo Innovation Magazine

Innovation. Simply Better. For German SME and Private Investors.

Kapilendo AG

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Banking. Aber besser. Für KMU und unternehmerisch denkende Menschen. https://www.kapilendo.de/

Kapilendo Innovation Magazine

Innovation. Simply Better. For German SME and Private Investors.

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