Classic Cars: Tips for Would-Be Investors

Vintage has been trendy for some time now, and classic cars remain popular among motor enthusiasts and investors alike. The almost surreal returns made with select classic cars continue to attract investors. 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 some tips that can help you understand whether or not classic cars could be a good fit for your investment portfolio:

• Get informed

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.

• The car's condition is a deciding factor

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 and 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.

• Not all classic cars gain value

Not all brands of automobiles make worthwhile investments. Ferrari collectors' items, for example, are particularly favoured. Seven of the ten most expensive cars sold at auction are Ferraris. But German (especially Mercedes) and British luxury cars (especially Aston Martin) can also achieve high prices.

The highest price so far was achieved by a 1955 Mercedes-Benz 300 SLR Uhlenhaut Coupe for more than 142 million dollars at an auction in 2022.

For investors, however, there is always the question of what price they bought the car for: High prices do not automatically mean high returns.

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 limited quantities.

• Other factors can also affect the price

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 affect the sale price more than its make and model.

• Price indexes can serve as a point of reference

In recent years, the average value of classic cars has 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 rose by 1.84 percent in 2024. In previous years, growth was sometimes stronger.

Table: German Classic Car Index (DOX), 2010 to 2024

Source: Verband der Automobilindustrie

Other important classic car price indexes include the K50 and K500 indexes from Geneva-based firm Kidston, the Hagerty Collector Car Indexes, and the HAGI indexes from Historic Automobile Group International.

For lower-value investments, in particular, it can also be beneficial to look at current prices on classified sites like Autoscout24. Active bids on auction websites like Ricardo and Ebay can also help you to understand demand for a car.

• Classic cars are not a liquid asset

A classic car is a long-term, tangible asset investment – much like real estate. 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.

• Capital requirements are high

As a rule of thumb: Classic car investments under 20,000 francs are rarely worth it, because possible gains in value may not even cover your maintenance and storage costs. A rough estimate shows that if you were to own a classic car valued at 70,000 francs, and had average storage and maintenance expenses, the car would have to gain value at the rate of 4 percent per annum just to break even. Even if your storage and maintenance costs were very low, you would have to count on investing around 50,000 francs to have a decent chance of earning a return.

• Avoid concentration risks

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.

• Investing in classic cars comes with a risk of loss

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 the purchase of a classic car as a consumer transaction. If you enjoy owning a certain car, then you win regardless of whether or not you are able to resell it for a profit.

More information:
How to invest in tangible assets
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