Reflecting the growing investment appeal.
Philip E. Richter, president of Hollow Brook Wealth Management and founder of the Turtle Invitational concours, notes a significant change in attitude towards classic cars over the past five years. "A 40-year automobile can be more than just a used car—it can be worth six figures or more," says Richter, highlighting the growing recognition of these vehicles as legitimate assets.
SFS's move into the classic car sector is further bolstered by Andrew Goldberg, a former J.P. Morgan executive with a deep passion for automobiles, who joined SFS as Senior Vice President and Head of Collectible Cars. Goldberg's role is to enable elite collectors to leverage their extensive car collections economically, offering loans up to US$200 million using the cars as collateral, a service unparalleled in scale and scope.
The synergy between Sotheby's and classic cars was further strengthened by Sotheby's acquisition of a significant stake in RM Auctions, a leading collectible automobile auction house, in 2015, leading to the formation of RM Sotheby's. This alliance has facilitated a steady flow of collector car auctions globally, aligning well with Sotheby's other divisions in art, watches, and wine.
Goldberg clarifies the rationale behind wealthy collectors opting for loans: it's a strategic tool for accessing liquidity for investment opportunities without the need to liquidate assets. It also provides capital in anticipation of auction sales or to manage tax exposure.
This approach to financing enables collectors to make significant acquisitions, such as a Ferrari GTO estimated at US$60 million, by either financing a portion of the purchase price or using other vehicles in their collection as collateral. However, Goldberg estimates that the pool of collectors who can take advantage of SFS's offerings is relatively small, numbering around 2,000 in the U.S.
The concept of leveraging collector assets is not new in the art market, where owners of high-value art collections routinely secure loans against their collections for various investments. However, financing classic cars is a novel approach, given the complexities involved in verifying ownership and titles.
An alternative for car enthusiasts is leasing collectible cars, a service offered by companies like Putnam Leasing. Rick Intile, national sales manager at Putnam, explains the benefits of leasing, including tax advantages and a streamlined approval process that shields the consumer from credit agencies.
The global market for collector cars, although cooling slightly from its peak, still presents a lucrative opportunity for specialists like SFS, especially as traditional banks may become more cautious in lending against these assets. This niche market's dynamics make it an attractive sector for innovative financing solutions, catering to the discerning needs of high-net-worth collectors.
Source: Barron's
