For many automotive enthusiasts, vintage cars represent an opportunity to own and experience an iconic vehicle from the past, be it to realize a lifelong dream or simply for nostalgia. At the same time, buying a classic car can serve as an investment that will potentially grow in value after being restored or maintained for a few years.
Of course, the latter approach is easier said than done. From gold to stocks, there are many ways to make money in the long run, and vintage cars are a no less complicated one. Your success depends on several factors, including how much you have to spend, the vehicle you choose, the condition it’s in, and its expected future value.
To simplify the process, let’s discuss some important considerations when investing in a vintage car.
The Classic Car Market
Historically, the vintage car market has outperformed other collectibles like coins and stamps, even beating the broad stock index. According to Historic Automobile Group International, which tracks the classic car market, the top index was up 33.78% in 2019 and increased by over 500% in the preceding decade as global wealth pursued limited-run models.
Granted, this represents the highest end of the market, with vehicles made by Ferrari, Lamborghini, and Rolls Royce selling for millions. Similar growth can be found elsewhere, though. For example, Hagerty, another classic car index, reported that the relatively affordable Datsun 240Z has tripled in value over the past ten years.
There are several other expenses that you need to keep in mind when dealing with classic cars. For example, insurance for vintage vehicles works differently, as they require special protection. You might also be concerned about whether you can get car insurance without a license, as providers don’t typically offer this.
However, it is possible to get car insurance without a license from a few insurance companies. They’re aware of the specific conditions of insuring a car that you’re buying to collect or restore – and not necessarily drive. You might want to opt for their comprehensive coverage as it also protects against events outside of your control, such as weather.
A few other expenses that may come into play are that of safely transporting, storing and maintaining your car. In short, you should have more than just enough to buy the vehicle itself.
As with any physical property, selling your car will subject you to capital gains tax if you turn a profit. In addition, the cost of properly restoring a damaged classic car to showroom condition can be extremely high given the rarity of certain parts. There are also commission and consignment fees, as well as transaction fees that need to be considered.
Finding success in your investment requires strong knowledge of cars and the market you will be working in. Unfortunately, not all models turn out to be worth as much as expected.
There’s no denying that investing in a vintage car can be tricky. That said, significant risk brings great rewards to those who do their homework.