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Classic Cars: 13 Tips for Would-Be Investors

Does investing in classic cars really pay off? If you’re considering collectible vehicles as an investment, check out these tips from the moneyland.ch team.

Vintage is totally trending. Classic cars have become a favorite capital investment in recent years. Word of the almost unreal profits scored for sales of select classic models has gotten around. But it’s important to understand that these lucky breaks are few and far between. The fact is that classic cars are not a good fit for every investor. Here are 13 tips that can help you understand whether or not they are a good fit for you.

  1. If you aren’t exactly a connoisseur, make sure you get to know everything there is to know about the automobile in question before you even seriously consider purchasing it. Online sources, journals and forums are good sources of information and are freely available. Fan clubs, auto dealers and experts are your best bet for solid information and educated opinions.
  2. Only buy high quality classic cars which are in impeccable condition. This rule always applies unless you can get an accurate quote for repair costs ad factor these into the vehicle’s cost. Another exception may be if you are a qualified auto body technician with the time and equipment to properly restore a damaged vehicle.
  3. The rule of thumb for an accurate valuation of an automobile’s worth is supply and demand. The more rare a particular collectible car is, the more it is (or could be). This rule especially applies to automobiles that were produced in exact, limited quantities.
  4. In recent years, the average value of classic cars has consistently gone up year-on-year. Unfortunately there’s no guarantee that this trend will continue in the future. But if you are looking for a general reference point, indexes like the German Classic Car Index (DOX) can provide a guide to developments in the market. The DOX went up by 4.2 percent in 2012, 8.1 percent in 2013, and 4.5 percent in 2014.
  5. Market analysts expect interest on the part of Chinese investors to increase in the wake of loosening market restrictions. This could add impetus to the classic car market. But alongside these predictions you will find a long list of economic and market-specific factors which have a cooling effect on classic car resale values.
  6. A classic car is a long-term investment similar to a private home. The capital you invest in a classic car will usually be tied up for some time. While you can’t completely rule out the chance of a quick sale at a profit, it would certainly be the exception to the rule.
  7. Rule of thumb: Classic car investments under 20,000 francs are rarely worth it, because the rate at which the car gains in value may not even cover your maintenance and storage costs. Just to emphasize this point, if you were to own a vehicle valued at 70,000 francs and had average associated expenses, the value of that automobile would have to increase by 4 percent per annum just to break even. In the best case, you will need to invest in a classic car valued at around 50,000 francs before you can even think of it as an investment.
  8. Not all brands of automobiles make worthwhile investments. Currently, your best bets are classic cars from Ferrari, Porsche, Jaguar, Mercedes and BMW. More modern 40 to 50 year old classic cars from these automakers which are still in good working order are also sought after. On the other hand, the chance of a Peugeot becoming a vintage goldmine is a lot slimmer. Still, there is always the odd exception.
  9. Race cars and certain rare models now attract 7 figure sums in the auction house. At this point U.S. auctions boast some of the highest final bids, while bids in Switzerland and elsewhere in Europe are somewhat lower. Bentley, Rolls Royce, Lagonda, Düsenberg, Bugatti and Ferrari are among the most valuable classic car brands. Sought after models from these automakers have shown value growth of up to 30 percent per annum or even higher. Extremely rare collectibles, including a Mercedes 540k special roadster, have sold for 8 figure sums at the auction.
  10. The classic car market is, much like the art market, anything but rational. A car with a special history, for example, may command a higher price than an identical vehicle without that history. In the event that a vehicle’s original owner was a world famous personality, this will likely have a positive influence on the car’s value. In some cases the hype surrounding the former owner of a car might even place its make and model on the backstage.
  11. Classic car funds offer an alternative to going at the vintage auto market on your own. Just note that these funds often come with high fees which can erode your profits.
  12. Some investors look at the purchase of a classic car as a way to diversify their assets. However, due to the high risk element associated with classic car investments, these should only make up a limited part of your investment portfolio.
  13. Even if you do your due diligence, the purchase of a classic car is still a risky investment based primarily on speculation. If you look at a classic car solely as an investment, you may end up getting the short end of the stick. The market is, by its very nature, volatile and unstable. A better option is to look at classic cars as an object of passion, rather than an investment. If you enjoy owning a car, then whether or not it increases in value, you win.

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The moneyland.ch magazine provides accurate, unbiased information on topics related to finance and money. In addition to research and expert interviews, the magazine contains numerous financial guides.