Car collection is a hobby that Americans love to do. The old school muscle car or classic car that you bought in your college time can be a source of earning a profit. If you are not willing to sell it, then it can find a place in your garage to store the honor or memories linked to your muscle car. The classic cars are purchased or sold at higher prices because now they are rare.
The high-end collectible such as classic cars can be sold for 5 or 6 digits. Sometimes, they are of 7 or 8 digits which is not affordable for everyone. But the high-net-worth individuals can buy it from a seller even for a higher price. Investing in classic cars allows an individual to diversify the holdings or to make money by selling them on profit. Also, they can drive on formal or casual events.
Tips And Risks of Investing in Classic Cars
A brand-new or modern car might not be as costly as the previous one. Driving an old school or classic car depicts your image that you are a high-net-worth individual. There are some tips and risks involved in investing in a classic car. You have to be careful about every aspect before you invest.
Sometimes, the investment at a lower rate in a classic car can give a higher profit in a certain period. On the other hand, they are sold on a break-even or even less than purchasing cost. Hence, you might have to face a loss.
Tips Of Investing in Classic Cars
One way of diversifying the holdings, an automotive enthusiast can invest in classic cars. It helps to diversify the investment portfolio. All you have to do is to look for classic cars. As a result, you will be having classic cars in your garage as a safe investment. If you are having a modern car, it will lose its value as soon as you drive it off the dealer. It is because it starts depreciating.
The classic cars gain value as they get older. The reason behind their high value and purchasing cost is that they are rare, and the performance or special attributes increase the value of the car. Investing in classic cars is advisable by the professionals as compared to the other cars. Even though the classic cars are high-maintenance and complicated but they are going to give you more profit than ever imagined.
The right classic cars can be valued at several millions of dollars. Collectibles such as coins, stamps, or any antique collection cannot be more profitable than a collection of classic cars. The car market is like an art market. You invest in a classic car; you enjoy the aesthetic investment.
If you want to transport it to another country, you can do it by hedging the currency. Also, it can be done at favorable exchange rates. Hence, people have been investing in classic cars more than other collectibles.
How Classic Car Is a Collectible
The cars that are having a historical background can be the best classic cars for investment. Also, the cars that were launched with new technology or changed the future of the motor industry can be of high value. A good-looking, beautiful, and rare classic car added to the investment portfolio can be a good idea. If you want to make more profit, then look for options that will be more profitable in the future.
If a classic car is having a racing history, it adds to the allure of the car. If the car is associated with a builder, racers, designers, etc. like Carrol Shelby or Raymond Loewy. Also, celebrity ownership adds value to the classic car collection. For example, if you have a classic car associated with James Garner, Paul Newman, or Steve McQueen, then you can sell the associated car for higher profits in the future.
What To Look for and What to Avoid
There are certain things that you should be looking for when investing in a classic car. The experts advise the investors that they should not be investing in a classic car having the signs of rust. The rust can be restored but it depends on the extent of the problem. If it is deep and a serious one, then it can be a money pit. Hence, you will be spending more on restoration than earning profits.
If you are buying a classic car from a private party then you should be looking for a rare or unique model, low mileage, and thrilling classic car. It will help you to sell it in future on profit.
Risks Of Investing in Classic Cars
Investing in a classic car is having some costs such as fees or commission. Owning a classic car is a tangible property and when you sell it on profit, you will owe a capital gains tax. If the classic car is in bad condition and you bought it for less cost, then keep in mind that you have to spend 6 or 7 digits to restore it to a brand-new or showroom-new condition.
It requires mechanical work, bodywork, paint job, interior design, etc. You have to consider insurance expense, storage expense, and maintenance cost in such cases. When your classic car is ready to be sold on profit, you will have to pay transaction fees, commission or consignment fees, transportation costs, etc. Luckily, you can perform some maintenance tasks on your own, and here’s a guide that can help you.
Earning profits can take time and calculations because if you are investing in a classic car, then you must be focusing on huge profits after costs and expenses.
Short-Term or Long-Term Investment
If you are thinking to buy a brand-new car and considering it as a collectible in a short period, then you might be making a mistake. Investing in classic cars is a long-term or multi-year investment. Only if you are lucky, a good deal can flip the long-term investment into a short-term investment.
Short-term investment cannot give huge profits because you cannot consider a $30,000 worth car to be of millions worth in near future. For example, when Dodge Viper was launched in the early 90s, some investors made investments and stored them in their garage. They believed that an aggressively styled sports car with 400 horsepower will appreciate. But it did not happen as they planned it to be.
The same thing happened with the 1976 Eldorado when Cadillac announced that it will be the last convertible of the brand. But it did not happen. Now you can find a well-maintained vintage Eldorado for less than $25,000.
Added Pleasure of Driving
Investing in the classic car brings a lot of risks. Another risk is that if you are buying it for the added pleasure of driving then you might not be able to make huge profits out of it. You might be reducing the value of the classic car if you use it frequently. Keep in mind, the buyer of the classic car will be looking for low mileage.
If while driving a classic car, you get a dent on its body, then be prepared for costly repairing and replacement. Also, it is hard to find the rare body parts of classic cars. You have to keep in mind that the classic car you are driving is not having the safety features as of modern car, so be careful on the road.
Classic Car Investment – Tips and Risks for Huge Profits
If you are having a hefty bank account and you want to diversify the investment portfolio, then investing in classic cars can be the best option. But it is not the best option for all investors because one should be knowing the auto market dealing. If you know about classic cars and their value in the current period, then you might be able to make a deal in a considerable amount.
On the other hand, if you are investing in a classic car like Morgan 4/4 as a short-term investment, then you might be making a mistake. It is one of the oldest car models that are still in production. There are plenty of risks involved while investing in a classic car, as a dent in the classic car can forfeiture your investment. If you’re thinking of investing in classic cars for the first time, check out our beginner’s guide to investing in classic cars.