It's high risk but high return. Investment in the luxury market is soaring - but are the Irish on board? Paddy Comyn reports
With SSIA money about to mature and scores of Irish people awaiting their investment windfall, there is a sudden urge for people to look for ways to spend, or indeed re-invest, their lump sum. Many will invest in property, pensions or perhaps stocks and shares.
But what about investing in four wheels? Can spending the right money on the right car yield the sort of return that will have you laughing all the way from the showroom to the bank?
Taking a look at the car sales figures in Ireland and more importantly at the type of cars that are selling well in Ireland, you will see that, despite VRT, we are spending more money on cars than ever before. And for the first time, a market has emerged for top-end supercars.
Aston Martins, Ferrari and Bentleys can be seen cruising the streets of Ireland, Dublin in particular. Obtaining these cars requires plenty of money - much more than the €15,000 or so SSIA savers are likely to get - but in many cases it requires patience too. High-end supercars such as the new Ferrari F430 have waiting lists of anything up to four years, something that seems like a lifetime to you and me and is utterly intolerable to an impatient and affluent businessman.
Such high-flyers will readily pay over the list price in order to obtain their beloved Aston Martin or Ferrari sooner rather than later and they will pay for your place in the queue or buy your nearly-new car from you for more than you paid for it.
For clever investors, therefore, putting down a deposit on a car can be a very worthwhile move. Russell Bray is a British-based motoring journalist who has tracked the market for car speculating and investing.
"Car speculators generally buy a place on the queue for a car and then will either sell their place on the queue to an individual or broker or else advertise their car for sale with amendments possible to the final specification," says Bray.
"Models that are currently popular, such as the Ferrari F430, are changing hands for significantly above list price and it is possible for anyone who got their car early to drive their car for six months and still turn a profit. Even a year's motoring could see them break even."
According to Bray, he has heard of people putting down money on the next BMW M3, before anything on the car has been confirmed, in order to turn a profit at a later stage. "As long as you have got the order in for the car and it is a confirmed order, with a £5,000 to £10,000 deposit, then when you are told your car has come along it is up to you what you do with it."
Speculating on cars is a phenomenon that became popular in the early 1980s, particularly in Britain and remains a lucrative, but very risky market today.
Paul Osborn runs Cars International, a London Docklands based company that deals in high-end supercars as well as priceless vintage and veteran cars. He counts the Sultan of Brunei and the Queen of Gabon among his customers.
"With a quality car with a quality history - particularly with a competition history - you really can't go wrong," says Osborn.
There are risks however. "Back in the late 1980s everything was going crazy. Cars like Ferrari F40s were a million pounds and 250 GTOs were even more.
"Then it all crashed and the F40s went back down to £150,000 but the GTOs kept going up and now they are worth £8,000,000.
"Now I buy the late model cars after they have had the hit. I like Porsche Carrera GTs at the moment. I have sold seven or eight of those. They are now £100,000 less than they were new." Osborn has recently attracted business from Ireland. They are mostly investors.
"I have had a guy over from Ireland twice looking at my Ferrari 275 GTS. But the one thing about the Irish guys is that they don't tell me much. I have another guy from Ireland who is going to buy a Gullwing.
"Most of these guys won't bring them back to Ireland. Many will end up in Spain. They do want the cars tax-paid but they don't want to bring them to Ireland. According to Osborn, Irish investors do their homework, too. "That 275 has gone up £50,000 in one year and the price on the Gullwings have doubled in the last two to three years."
So could the same happen here? According to Michael Cullen, of Des Cullen Cars in Sandyford, who imports top-end cars such as Bentley, Ferrari and Aston Martin, the answer is a resounding no.
According to Cullen, Vehicle Registration Tax (VRT) is to blame for this. "The fact of the matter is that the VRT rules mitigate against this type of car culture. Take the Ferrari F430 for example. You can buy a Ferrari F430 today in Britain and pay £125,000 for it - you could drive it until this time next year and get £118,000 for it. In Ireland, you pay €300,000 for the car and I might look to get you €220,000 for it next year."
How the Revenue Commissioners price a supercar is shrouded in a certain amount of mystery. VRT of 30 per cent is paid from what's called the Open Market Selling Price (OMSP) of the vehicle and this, according to the Revenue, is the price including all taxes and duties that a new vehicle and all its enhancements and accessories "would fetch on a first arm's length retail sale."
If there is not a manufacturer or sole wholesale distributor, as would be the case with something like an Aston Martin or Ferrari, then the car is treated on an individual basis and this price can fluctuate. "The VRT on the Aston Martin AMV8 went up by €8,000 between the time it was launched and when it landed here," says Cullen.
Taking the example of the Aston Martin DB9. The car in Britain costs £106,850 (€156,019). In Ireland, the Revenue deems the car to have an OMSP of €229,080. So even if you imported it at the British price, you'd still face a VRT bill of €73,061.
According to Cullen, if VRT were refundable if the car was exported again, then you would see an Aston Martin or Ferrari on every street corner, because people would realise that they are not going to lose €40,000 to €50,000 on their car. As it is, people would be worried the Irish market may be just too small for their ageing supercar.
There's a larger pool of buyers in Britain but we're restricted from selling back to them because of the VRT.
"Business is good because of the economy, but business would be better if there were a more reasonable and an EU-legal tax, because we feel VRT is illegal."
For the more modest investor there is another way of making a decent return on a car and that is to buy a classic car or speculate on what will become a classic. Paul Kanters runs Classic Cars Ireland and believes that cars like early Porsche 911s, and 1965-69 Ford Mustangs make good investments.
It is possible, according to Kanters, to pick up these cars from abroad at the right price and because there is no VRT on cars over 30 years old, you could potentially turn a profit or break even on the car after a few years of light use.
"There are some future classics to keep an eye on such as early VW Golf GTi and Peugeot 205 GTi. Cars that have stayed in production for a long time are also worth looking at such as early Saab 900s and early BMW 3-Series, especially the 323i."
So until such time as VRT could be refundable to supercar dealers, which would allow them to sell such cars back to the more receptive British market, then for Irish buyers a supercar will not yield them the return they might wish.
But for the shrewd and gutsy investor, a classic car, be it a potential or established classic, could well be the real thing.