There was excitement at auction house Bonhams last weekend when a 1935 Alfa Romeo sold for almost £6m, a world record for the marque.
The £5,937,500 paid for the ex-Tazio Nuvolari 1935 Alfa Romeo Tipo smashed the previous Alfa record of £4,245,118, achieved when a 1933 Alfa Romeo 8 cylinder Monza 2300 was sold in California in 2010.
The sale at Bonhams Goodwood Revival Meeting last Saturday was the latest in a year marked by booming prices paid for classic cars as collectors indulge their passion while picking up a valuable rising asset.
In July an F1 Mercedes driven to victory by Juan Manual Fangio in 1954/55 was sold for £19.6m, the highest price for any car ever sold at auction.
But it is not just racing legends that are proving to offer attractive investment opportunities. Over the past six months classic cars, such as Ferraris, Bugattis and Bentleys, have shown the strongest growth of any alternative investment, rising 21 per cent.
Over the past decade classic cars have done even better than gold, rising 430 per cent in value, according to Knight Frank's Luxury Investment Index. Over the same period, the FTSE 100 climbed just 55 per cent.
But there is an even more powerful reason to invest in classic cars beyond the fact that they are growing in value so quickly. That is the tax benefits, as Susan Spash, partner at London chartered accountant Blick Rothenberg, explained.
"Classic cars are an investment free from capital gains tax, which would otherwise be chargeable on UK residents selling investment assets and making a profit," she said.
"This specific exclusion is because they are categorised both as 'wasting assets' and passenger vehicles."
Wasting assets are defined as possessions such as machinery and items with a predicted life of less than 50 years. They are exempt from capital gains tax, which would otherwise be charged on gains above the annual exemption of £10,900 at 18 per cent, or 28 per cent if you are a higher-rate taxpayer. The tax advantages, however, come with the potential drawback that if you lose money when selling a classic car you can't claim tax relief for the loss, as you can with other valuables or assets.
Chris Routledge, managing director of international car auctioneer COYS, said that the demand for classic cars as an investment was at an all-time high. "For example, the Aston Martin DB4 average global auction price before the recession was £135,000 and after the recession it went up to £207,000," he said.
Another world record set last Saturday was for a standard road-going E-Type Jaguar. The 1961 E-Type 3.8 Series 1 flat floor Roadster that had been owned by one family since 1963 went for £225,500.