No classic car purchase is a 100% sure bet when it comes to increasing its value, though there are a few ways you can improve your chances when it comes to recouping your car or truck expenditures over the years…or at least keeping more money in your pocket when classic car investing. As a hobbyist owning a cool classic car should be its own reward since it is fun to drive, great to look at, and it comes with a global community of fellow enthusiasts built around it.
As far as the monetary side of things, classic cars can be a good investment … depending on what specific car you choose. Ideally, you will buy a car because you love the car itself, not the potential payoff down the line … but sometimes you can get lucky, and you get both. Thanks to the Internet it can be relatively easy to track the classic cars that interest you. Insurance companies like Hagerty provide you with valuation tools, and there are also classic car auction sites such as Barrett-Jackson, Mecum, or Russo and Steele that can help you spot trends.
The process is more than just a numbers game. Find a car you like. A fondness for a model and the pleasure in owning it can soften the blow if the market suddenly devalues your car. A classic car, in which you take pride and build an attachment, is far different than owning stocks and bonds. Whether or not classic cars are worth the investment depends on various factors and individual preferences.
Understanding What Makes a Classic Car
Classic cars date back at least 15 to 25 years, but more importantly, possess some quality that makes them interesting to collect. This may include unusual designs and limited production runs. The rarer the car, the more valuable it is likely to be. Cars more than a century old fall into the separate category of antiques.
As you would for any investment, research what you are interested in buying carefully. Weigh each deal independently and make a sound decision. That means finding a car that meets your budget, is in good shape and is likely to have strong resale value.
Here are some points to consider for classic car investing:
Rarity and Desirability
Classic cars that are rare or highly sought after tending to hold their value well and may appreciate over time. Limited production numbers, iconic models, and historically significant vehicles often have higher demand among collectors and enthusiasts, which can drive up their value.
Condition and Authenticity
The condition of a classic car plays a crucial role in determining its value. Well-preserved, original, or fully restored cars typically command higher prices. Authenticity, including matching numbers, original parts, and documented history, also contributes to a car’s value.
Market Trends of Classic Car Investing
Understanding the current market trends and future projections is important when considering a classic car investment. Researching historical price trends, consulting with experts, and staying informed about the market can provide insights into potential investment opportunities.
Maintenance and Restoration Costs
Classic cars often require ongoing maintenance, repairs, and occasional restoration work. These expenses can add up, especially for rare or exotic models with limited parts availability. It is essential to consider the potential costs involved in keeping the car in good condition.
Enjoyment and Passion
Investing in a classic car is not solely about financial returns; it is also about the enjoyment and passion for vintage automobiles. If you have a genuine interest in classic cars and derive pleasure from owning, driving, and showcasing them, the investment can be rewarding on a personal level.
Diversification
Classic cars can be a part of a diversified investment portfolio. Investing in tangible assets, such as vintage automobiles, can provide diversification beyond traditional investments like stocks and bonds. However, it is crucial to consider the overall risk profile of your investment portfolio and not allocate an excessive amount to a single asset class.
Long-Term Perspective
Investing in classic cars typically requires a long-term perspective. While some models may appreciate in value over time, the market can also experience fluctuations and cycles. It is important to have patience and be willing to hold the investment for an extended period to potentially realize returns.
What Makes a Car Collectible
Cars with historical importance—ones that pioneered new technology or raised the bar for consumer expectations—can become collectible, especially if they are rare and beautiful. (Being good-looking is an advantage.) A racing history adds to a car’s allure, as can association with a respected designer, racer, or builder such as the likes of Raymond Loewy or Carroll Shelby. Prior celebrity ownership can also help, especially if the individual is associated with cars, such as Steve McQueen, Paul Newman, or James Garner. The most expensive collectible cars combine these attributes.
As a basic rule of thumb, if teenaged boys have their picture taped to the wall, you are looking in the right direction. When those boys grow up, they want to buy the things that made them happy in their youth.
The car market mirrors the market for art. It is an investment you enjoy aesthetically, and it can also provide a currency hedge since vehicles can be transported to countries with favorable exchange rates.
Car Investing Risks
Just as most investments carry fees, so do classic cars. This is tangible personal property, and you will owe capital gains tax if you sell at a profit. Is your collectible in bad shape? Restoring a seven-figure car to concours condition—generally considered bringing an older car to showroom-new condition using original or exact recreations of parts, paint, and bodywork — can cost another seven figures. Then there are ongoing maintenance costs, storage expenses, and insurance. Profits from the eventual sale of the car will also likely incur commissions/consignment fees, transaction fees, and transportation costs—because chances are you are not going to tow a Ferrari behind a U-Haul.
Buying a new or newish car because you think it will be collectible someday is risky. Sure, you could get lucky, but chances are you are not going to be able to buy a cheaper car and expect it to be worth millions in a relatively short period.
Be Aware of Extra Expenditures
When you decide on a collectible auto to add to your portfolio, remember that the price you pay to get the car in your garage is just one factor. There are a lot of other things to spend your money on beyond that, which will cut into your take when you decide to sell.
Regular maintenance of your vehicle is a must – the further you get from mint condition, the less value your car commands – and percentages like transporting your car to a private sale or the cost of an auction commission all get sliced off the top. The costs for storage and insurance are all part of your asset cost. (And do not forget the capital gains tax at the end of the fiscal year.)
Finally
It is important to avoid buying anything on impulse or because you know somebody who’s offering a classic for sale. You could end up with a car you cannot sell that is taking up space in your garage, or you may have to pay far more in restoration costs than you could hope to recoup.
It is recommended to conduct thorough research, consult with experts, and evaluate your own financial situation, risk tolerance, and personal interests before deciding to invest in a classic car. While classic cars can offer investment potential, it is important to consider them as a long-term passion and investment combination rather than relying solely on financial returns.
