Insuring your Classic Car in South Africa

South Africa's classic car industry is booming. Should you hop onto the trend? And if you do, how do you insure a classic?

Classic cars used to be a niche market, but recent months have seen interest revving up among a wider range of investors, dealers and buyers. At the top end of the market, where a rare Mercedes 300SL roadster recently sold in Cape Town for R23 million, classic cars have become an asset class all of their own. As with fine art, investors flush with cash are looking for assets in which to park some money (excuse the pun), and vintage (or modern) classic vehicles are an ideal option.

An interesting aspect of this trend is the purchasing power of buyers in their 30s and 40s; people who grew up with certain cars plastered on their bedroom walls, or pushing scale models around the floor of their bedrooms.

The so-called "modern classics" are cars from around 1990 to date, and are sometimes referred to as "The Youngtimers". These include such cars as the BMW 325is "Gusheshe" and many of the other BMW M models, Volkswagen Golf Mk1 GTI, Opel Kadett GSi 16 S "Superboss" and the Alfa Romeo GTV6 3.0.

South-African-only modern classic cars are increasingly valuable

Interestingly, South Africa has a rich history of classic cars, as a number of rare and special models were developed, built and only ever sold in South Africa. The driving force behind these so-called SA Specials was the popular local racing series of the '80s and '90s. Hundreds of thousands of fans would flock to race circuits across the country to watch their heroes – BMW, Opel and Alfa Romeo – battle it out on track.

At the time, race series rules stated that to enter a race car into a particular series, there had to be at least 200 identical road-going production cars manufactured and sold openly to the public. This led to a development war between these rival manufacturers, from which the BMW 325is, Opel Superboss and Alfa Romeo GTV6 3.0 were born.

Built in tiny production runs (only 208 Alfa GTV6s were ever made, for example), these cars were hot property back in the day. But as the glow of their racing days faded, their value dropped and many were either written off, left to rust, or modified to ruin, meaning that their numbers in the present day are even lower.

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Today, however, these ultra-rare classics are highly sought-after. Interest among enthusiasts has driven prices well over the million-rand mark in some instances, with an Alfa GTV6 3.0 recently selling for over R1.4 million at auction.

Car Insurance for a second-hand car in South Africa

What does this all mean for you? There are some challenges to insuring a classic second-hand car that's 15 years old or more in South Africa. The central issue is that insurers assess your vehicle based on a "book value" and more often than not, that price is miles away from the current market value of the car.

The older the car, the worse this problem becomes. For example, the book value of a 2001 BMW M5 is roughly R104,000. That number is based on trading data from 20 years ago, which is all the insurers actually have access to. Classics tend to change hands privately, with no record of their sale prices, leaving insurers with nothing else to work with.

Learn more: But What Would it Cost to Insure SA's Most Popular Cars?

Today, the same BMW M5 (in very good condition and with low mileage) would sell for R600,000 or more, while higher mileage models might fetch R350,000 to R400,000. The value of this particular vehicle has skyrocketed in the past few years, and insurers simply have no way of keeping up.

So you could choose to insure your vehicle for its book value, but – as the M5 example proves – that wouldn't make much financial sense. If your M5 was insured for its R104,000 book value and it was stolen or written off, you'd be left with a huge deficit as you'd need to pay market rates (north of R350,000) to replace it.

How to insure modern classic cars for market value in South Africa

There is a solution, though. Most insurers will accept a third-party valuation of the vehicle, submitted to them in writing and preferably on the organisation's letterhead. There are two avenues to pursue here.

Firstly, you could approach a recognised car club that represents the vehicle you are purchasing. The chairman or secretary should be able to help you by assessing the car and issuing a valuation letter.

The second option is to approach a specialist vintage car dealer. Reputable institutions such as Crossley & Webb will assess your vehicle and provide a letter for your insurance provider.

The market moves quickly and values change all the time, so it would be prudent to have the vehicle assessed and its insurance value updated at least once a year. This will increase your premiums, but that's a relatively small price to pay for full cover in the event of the unfortunate loss of the vehicle.

There is always some risk when buying a used car of any age, and buyers would be well-advised to carry out as much research as possible before making a purchase. Not all insurers cover classic cars, because of the expense and availability of spare parts (especially for rare models). So be sure to speak to your insurer before you buy, and make sure you're adequately covered.

However, as many classic car owners will tell you, there is great joy to be had in owning and driving a golden oldie. The pleasure of opening the throttle on your perfectly maintained Gusheshe or Superboss will make that paperwork worth the effort.

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This article is for informational purposes only and should not be construed as financial, legal or medical advice.