Do you consider classic car collecting a hobby, or do you see it as more of an investment? Researching, collecting, and restoring vintage cars have become increasingly popular, but everyone has their own motivation for doing it.
Classic car collections and car investments, while related, serve different purposes, and are approached with different motivations.
Why Classic Car Collections
The purpose of having a hobby is to participate in an activity that brings you pleasure. So, if you want classic car collecting to be a hobby for you, follow your pleasure. Buy the car that makes you smile, and brings back happy memories, or maybe you will finally get the one you wanted when you were younger but could not afford to buy.
Collecting vintage cars is an expensive hobby, but one that will bring you lots of enjoyment and satisfaction. If you did not know, classic car collecting is a big thing. There are vintage car collector clubs all over the US and internationally. There are classic car shows where collectors shine up their beauty and display them for others to admire.
Of course, you will need space to store your vehicles and space to work on them. You will also invest in tools and supplies to restore and repair your classic or vintage cars. But this is all in service of your enjoyment and fun. You can consider classic car collecting a hobby when you follow your passions, buy cars that you love, and when working on them brings you pleasure.
Here are the key distinctions between classic car collections and car investments:
Classic Car Collections:
Passion and Enjoyment
Collectors often build classic car collections out of a genuine passion for vintage vehicles. The primary motivation is the enjoyment of owning and preserving iconic or historically significant cars.
Diverse Models and Eras
Collectors may focus on a particular brand, era, or type of classic car, but the emphasis is on variety and personal preference rather than financial return.
Long-Term Ownership
Collectors typically plan to keep their cars for the long term, appreciating the historical and aesthetic value rather than viewing them as short-term assets.
Maintenance and Preservation
The focus is on maintaining and preserving the original condition of the cars, including period-correct restorations, to showcase the vehicle’s history and craftsmanship.
Limited Selling Intent
While collectors may occasionally sell or trade cars, the decision is often driven by personal preferences or to make room for new acquisitions rather than seeking immediate financial gains.
Connection to Automotive History
Collectors often see their classic cars as pieces of automotive history, contributing to the broader cultural and historical narrative of the automobile.
Car Investments:
Profit Motive
Car investors are primarily motivated by the potential for financial gain. They view classic cars as assets that may appreciate in value over time.
Strategic Purchases
Investors may strategically select cars based on market trends, rarity, or historical significance with the aim of maximizing future resale value.
Active Trading
Car investors may actively buy and sell cars based on market conditions, timing their transactions to capitalize on trends or specific events that could affect the value of certain models.
Restoration for Value
Restoration efforts may be focused on enhancing a car’s market value. Investors may prioritize modifications that increase desirability among potential buyers.
Diversification
Some investors view classic cars as one component of a diversified investment portfolio, alongside stocks, real estate, and other assets.
Market Trends and Forecasting
Investors closely follow market trends, auction results, and industry forecasts to make informed decisions about which cars to acquire for potential future returns.
Short-Term and Long-Term Holdings
While some investors may hold cars for the long term, others may adopt a more active trading strategy, buying and selling relatively quickly to capitalize on short-term market fluctuations.
Finally
It is important to note that there can be overlap between collectors and investors, and individuals may engage in both collecting for passion and investing for potential financial return. The distinction lies in the primary motivation behind acquiring and maintaining classic cars. Ultimately, whether collecting or investing, understanding the market, doing thorough research, and seeking professional advice are essential for making informed decisions.
So, if you intend to mortgage your house to start investing in collector cars, you had better learn the strategies that investors use. In my opinion, the two most important things are to “diversify” and to know the true cost of your investment on an annual basis. As any investor will tell you, you must diversify. If you buy only one car as an investment, and you are wrong, you have lost everything. Knowing the true cost of ownership is not as simple as it seems.
Investing is different from collecting. If you, as a collector, bought your 1969 Firebird 400 Convertible for $20,000 five years ago, and just sold it for $30,000, you would have made $10,000. If you as an investor did the same thing you probably lost money. You must factor in the cost of storage, insurance, maintenance and repairs, marketing (at sales time), and transportation (if you plan to bring it to a major auction). Do not forget to factor in the cost of the money itself. Tying up $20,000 for five years has a real cost.
Opportunities still exist. It is up to you to ferret them out. Just remember to take off your “collector hat” and put on your “investor hat.”
