Investing in Classic Cars

Investing in classic cars has the potential to offer significant returns. So, what should you look for, and how do you sell a classic car?

If you’ve ever bought a new car, then you’re probably aware that the moment you drove it off the lot, its value plummeted. A sports car might be cool, but they typically hold value like a sieve. However, some cars, if they are rare enough, historic enough, or if teenage boys across the world had posters of them on their walls, can increase in value – making you a tidy return.

Investments in classic cars are becoming more and more popular, but are they a sound investment choice? And how do you know what to look for when you start researching a vehicle to invest in?

Are classic cars a good investment?

Like any investment, before you dive in, it’s important to consider your own risk tolerance, time frame and wat’s you’re looking to achieve by investing. Classic cars can make a good investment, however, it is important to consider the type of car you invest in and the condition you can maintain it in. If you select the right vehicle as an investment, you could be enjoying generous returns.

Performance of classic cars

Classic cars have even outperformed the stock markets in recent years, with some investors seeing returns of almost 500% over the last decade. The impact of the pandemic carried into the car investment space, with many sales being postponed or moving online. However, classic cars offered a 334% return over ten years, compared to 182% for coins, 103% for stamps and just 69% for watches. Of course, your specific return will depend on a host of factors, including the condition of the vehicle, how popular it is, and even the specific colour and trim.

Related article: Car Insurance for Vintage & Classic Cars

What do classic car investors look for?

Generally speaking, the value of any particular car depends on its rarity. A 2014 Toyota Camry is probably never going to be particularly collectible – there are just too many of them out there. On the other hand, a Porsche 993 GT2 can easily go for over a million dollars, as only 57 were ever made. Of course, tastes change over time, and what was seen as junk in its time may become a classic in the future.

Condition is also an important factor; a lower odometer will generally reach a higher price. Dents, rust and scrapes will negatively impact the price, and typically the closer it maintains its factory specs, the better a car will usually sell.  Restoring a beaten up classic is an option, but be aware that this can be very costly and easily eat into your profit. Documentation can also add value to the car as it can be a desirable and transparent selling point for future buyers.

A good story or a ground-breaking innovation might also make a particular car a better investment. Connections to celebrities, a racing past or the first introduction of an important technological innovation may all serve to increase a cars resale price. And of course, never discount how important the aesthetics of a car can be – a ‘cool’ looking car will likely attract a better price than an ugly one.

What are the risks classic car investors should consider?

Cars are no different from other investments in that there are risks associated. If you’re looking to invest in cars, it’s worthwhile considering the ongoing costs to protect your vehicle through insurance. Any damage, theft or fire to the car would be detrimental to your returns, so every care must be taken to ensure the car is looked after. Having a dry storage space is also essential to preserve the car’s condition, along with keeping it out of direct sunlight to avoid degrading or corrosion.

If you’re considering car restoration or preservation, it’s important to consider the level of work involved as it can be a timely and costly exercise. It’s worthwhile weighing up how much value could be added versus the expected return.

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Cars with investment potential

The prices of a number of cars have increased during the 2020 pandemic, especially as public transport declines and people are becoming interested in the restoration factors. According to the Car Investor, these cars could be worth looking into:

• Alfa Romeo GTV
• BMW E60 M5
• Aston Martin DB7
• Toyota MR2 Mk3
• Maserati Quattroporte
• Porsche 911 Carrera 996
• Audi TT Mk1
• TVR Tuscan
• Jaguar XJS
• Porsche 944

How to sell a classic car

When it comes time to sell, auction houses tend to be the major venues for most investors, but a private sale to a particularly keen investor isn’t unheard of. Once again, research is key, knowing what the market is interested in may help to secure a sizeable return.

If you’re serious about investing in cars, the Historic Automobile Group International can be a handy resource. Their HAGI Top Index is the benchmark for collectable cars, tracking close to a hundred years’ worth of models and makes. Sites like carsguide might also help you in researching the market, but be aware that a substantial number of sales are never publicly reported.

Before you drive off

A classic car is generally a long-term investment, and comes with associated risks and costs. Theft, rust and fire can all easily cost you your return, and the cost of insuring and protecting against such events will add up. Maintenance is another major cost, particularly for rarer models that might have very few, if any, spare parts available. You will also need to factor in storage, particularly if you’re building a sizeable portfolio.

Investing in classic cars may offer significant returns, but be aware that it is a volatile market and the costs involved can be high. Of course, owning a classic car from your childhood will always be just a little bit special.

Originally authored by Tim Smith

Image source: By Photoboi /Shutterstock.com