Joe Priday on supercar investing

31st August 2022

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Following on from our Ferrari F40 valuations deep dive, our guide to supercar investing and our market breakdown, we saw a golden opportunity to sit down with PaddlUp Co-Founder and avid car collector Joe Priday who provided some expert counsel on the world of supercar investment. 

 

Joe has been investing in supercars for a number of years and owing to that experience, he now has a firm grasp on the remunerative opportunities it presents. He opined that it is a viable alternative to other forms of investing, such as a property portfolio or stocks and shares.

 

What are the benefits of investing in supercars? 

 

The key thing for me is that it's an asset that you can look at, enjoy, have some fun with and crucially for an investor, it’s tax-free. If you are buying as a collector, art let’s say, the amazing thing about it is that it's tax-free.

 

The only thing you have to be careful of is if you do lots of buying and selling in quick succession the HMRC deems you to be a trader and then the money you make is taxable, so I tend to buy and hold. I look for three-year periods and go from there. It’s a nice sideline, tax-free gain and along the way you have lots of fun with it, it’s as simple as that. 

 

In your experience, how has supercar investing performed against other kinds of investments? 

 

The car market has been very strong. That’s correlated with the change around buy-to-let rules for property. So the government actively does not want landlords with loads of properties so you effectively get punished, you can’t have tax relief on the mortgage interest for example. Also, to buy a second property, you have additional stamp duty so there are a lot of barriers to entry as well as barriers to holding property, it’s very deliberate to steer you away from that. 

 

Naturally, that drew people to look at cars with the changes happening with EVs etc. People have started looking for things that will never happen again in the car world. The screaming V12s, V10s, it’s that roar of the jungle, that adrenal response to the noise and people are really recognising that. The fact that it is now disappearing has incentivised people to get something before it’s gone. That naturally pushes values up. 

 

In my experience, it’s all about what you pick. If you look at the Ferrari F40 for example, it’s a relatively low number car, it’s the right brand, it’s the right experience, it’s the rawness, everything around that has pushed that asset up in value. Also, when you’re picking, again using the F40 as an example, they had their initial bounce because they hit the 25-year USA import mark so they get exported to the states. There’s no import tax etc and that makes a massive difference, the market over there is a lot riper because there were fewer F40s that went over there initially, and on top of that they all want euro spec cars so again, it’s that 25-year mark. 

 

It is worth checking how much these things cost to run, servicing, repairs, all that kind of stuff is very expensive. Something like an F40 is relatively low maintenance and cheap to run so again it comes back to what you pick. It’s all well and good saying something has gone up £100k over the last three years but if it costs £25k to keep it going, whilst you’ve also had finance costs  again, the good thing with cars is it's easy to raise finance against them   if you’ve got a six per cent interest cost per anum, you need to factor that into your gains. 

 

Are there any other telltale signs of a good car to invest in? 

 

In the back of your mind, you’ve got to always think about who’s going to be able to afford this. If you look at say 25-30 years ago, the London to Brighton pre-war stuff was very popular, it was worth a lot of money and that moved into war-time stuff, the fifties and sixties. When somebody reaches their mid-40s, they look for their poster car because frankly, they can now afford it. So you’re always trying to look back from that point, the Lamborghini Countach, the Ferrari Testarossa, the Diablo, all those poster cars have gone through that process. 

 

Over the last couple of years, we’ve started to see the fast Fords coming in at massively inflated prices all because people had them on their bedroom walls so it has moved on through the nineties. I’m starting to look at what happened in the noughties, there were different noise regulations then so you still had really loud cars. Also, those guys would have probably been a bit of a lazier driver so actually, the cars of the eighties and nineties weren’t actually that comfortable or easy to drive so they might start coming off the crest of that wave in future because it starts becoming maybe a bit slow compared to today and frankly, everyone wants to sit with their air con and a super quick paddle shift box. However, they’ll still want the noise so the trend moves through the eras. 

 

I don’t really see much appetite for pre-sixties, there’s nothing from that era that’s ‘the big thing in vogue’. The seventies had the De Tomaso Pantera, that sort of thing but overall a pretty poor decade, I’d say we’ve definitely done the eighties now, only the best stuff is continuing to go north and rightly so. We’re getting there with the nineties as well so I’d say we’re getting into the noughties now in terms of looking for the right investment. 

 

As we’ve already covered, it always coincides with the 25-year rule when they go to the states. I don’t want to give too many things away that I’m looking at but, I know a lot of people are snapping up Impreza P1s, Mark 1 Ford Focus RS’, those things that never happened in the states and actually, right-hand drive stick shift is a cool thing to have over there so you start seeing those trends. 

 

Everything started becoming ballistically quick in the noughties, you still had the proper noise up to say 2012 with the emissions and noise regulations that came in so we might even be in the absolute sweet spot of 2000-2014. Nobody really knows what the next thing to take off is going to be but that’s where I’m looking at the moment. 

 

Historically, a V12 Ferrari wasn’t good news for investing. That’s certainly changed now and it’s been proven with the 812 because we’re not seeing them anymore. Obviously, naturally aspirated V8s, the 458, and some of the earlier Lambos. It’s always about the numbers made so the exclusivity, and the noise – the event. You also don’t want to be bumping into anyone at a meet who has the same thing. 

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Alternatively, is there anything you keep an eye out for to avoid when investing in supercars? 

 

Definitely the cost of ownership. To me, that’s the biggest factor. I know some people who own Bugatti Veyrons etc, when it needs a service you are paying to send it back to a specific place where it has to be serviced and all of those kinds of things. You’re trying to pick the things that can be easily serviced, ownership is easy and is also a sensible price, otherwise, in my experience, you get pretty disheartened by it. There are a few cars that have suffered that fate, McLaren P1s for example when they were having battery issues. You want to avoid those situations where things go wrong. 

 

What’s the best strategy for supercar investment? Are there things you can do to optimise your ROI? 

 

Depending on where interest rates are going to go, as a strategy, it’s obviously always good to spread risk and with that let’s say you were lucky enough to have half a million pounds to invest, you could potentially split that across three cars and use asset finance. A lot of the large collectors use asset finance because it’s cheap, it’s relatively easy to obtain against that asset and it allows you to spread risk and also increases the opportunity for reward. 

 

There are various opportunities out there at the moment, you should be able to beat the cost of your finance if it's three, four, or even five per cent, then you’re better off preserving cash and you can invest in other things. It’s all about diversification. Being geared on an asset that is easily transferable across the world and that you can turn into cash very quickly, the risk profile of that is a lot better than for example buying a load of houses where if there’s a sudden downturn it’s very difficult to turn into cash quickly. 

 

Can you keep a car as an investment and still use it on the road? 

 

The market is changing on this point because of the event, the noise and the thrill that I mentioned earlier. People aren’t experiencing that as much anymore so museum pieces or ‘garage queens’ are now falling by the wayside. People are starting to want to use their kit more, still limited use don’t get me wrong, they’re not going to be commuting in it. You’re seeing it with the closing of margins, again using the F40 as an example, the most expensive F40s to the cars that have 50,000 miles on the clock and are looking a bit tatty, the spread between them is reducing. The bottom end is around £1.4m and the top end is at £2m for an absolutely pristine one so the gap, by all accounts, is actually quite small and only getting smaller just because people want to use them. 

 

Some mileage isn’t necessarily a bad thing, at least you’re experiencing it which frankly is the point. If you want a collection and it’s going in a museum well that’s your thing but I do think the market is shifting to people who want to use them. Of course, you can use your investment, use it sensibly and it’s not going to do any harm to its value. 

 

Is there anything specific you do before selling? 

 

I am a huge convert – and when I say convert I mean in the last six years –  to PPF technology which has become exceptionally good. I am an advocate for getting cars deep machined, paint corrected and then PPF’d, I’ve had it before where someone has brushed by the car and it kept it pristine. That's something I do to absolutely everything. It’s extortionately expensive to correct modern paint if you do have any sort of an issue so protect it at all costs.

 

Something else I’ve started doing is dry icing, cleansing the underside of the car. It’s sort of like if you’ve got something pre-nineties, the old wax oil tricks, it’s basically the modern equivalent of that. It’s an absolute must. 

 

Also, the roads aren’t great so you can’t escape stone chips so especially if you’re going to use something on the roads you should be getting that covered off including your windscreen. Unfortunately, I did once have to do a windscreen on my F40 and that’s when you’re in real trouble, that becomes a big problem to have to replace. 

 

Anything else to add? 

 

With covid shutdowns and how long that has gone on in Japan, there’s massive pent-up opportunity over there for auctions which is something I’m planning on doing. Going back to what could be a good investment and what was on your bedroom wall, Fast and the Furious Celicas and all of that carry-on. That’s more obtainable if you’re in your mid-30s, you might end up being very silly and buying a twin-turbo Supra that you could’ve got for about six grand not that long ago. If you’re looking at that in the states, the right-hand drive, stick shift was what was so cool but ultimately, you want to go left-hand drive with a miles car, if you're going to do the 25-year export, that’s where you get the proper bunce. It’s also worth talking about currency, when the pound isn’t looking great, that’s a good time to be exporting which again is why the F40 got dragged up in value. 

 

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