Classic cars can be a very good investment and have easily outperformed stock markets, property, jewellery and just about every other tangible asset class. Making investing in classic cars a great opportunity and a great way to diversify an investment portfolio.
The classic car industry is worth an established £7.2 billion to the UK economy per year, with some 1,540,000 classic cars being registered, and more than 34,000 people being employed by over 4,000 businesses.
So todays classic car market is mature and well understood and filled with active knowledgeable collectors, enthusiasts and experts who know what they are doing and exactly what they want to buy. These investors won’t pay over the odds for cars that don’t have a great history or pedigree, but they are still prepared to dig deep when they find the right car. These days cars are valued for their history, rarity and provenance rather than purely on their condition.
This is in contrast to the boom and bust of the late 1980’s and early 1990’s where the cars were solely valued on their condition, and speculated on by ill-informed foreign investors.
Which classic cars are a good investments?
The market is very diverse with opportunities at almost every price point meaning you don’t need to invest millions in a classic Ferrari to see a good return on you investment. Hagerty’s Affordable Classics Index has show the largest increase in values in resent years proving you don’t need to invest large amounts of cash to see a very healthy return on your investment. Post-war British cars have also seen a surge in values in recent years, with everything from the most beautifully E-types to the more humble MGB seeing a marked increase in value.
Car indexes also show that post-war German collectible cars have been doing very well too, with the top models from Porsche, BMW and Mercedes-Benz providing big returns on investments. These include cars like the well established Mercedes-Benz 190SL and the beautiful Porsche 356 as well as the rarer BMW models.
Modern classics from both markets have also seen a steep rise in values. This part of the market covers anything from the late 70’s through to the early 90’s, and includes everything from the Citroen 2CV to the fastest of supercars from those eras. So you really can find a suitable investment regardless of your budget.
At the very top of the market the true ‘Blue Chip’ investment cars have continued to perform well. These cars represent the very pinnacle of classic car investing and are thought of as fine art rather than vehicles. These include the likes of the Ferrari 250 GTO, Bugatti Royale and Mercedes-Benz 300SL Gullwing. The increases aren’t as high as a few years ago. But they are still strong and demand for the right cars is as high as ever, meaning they are still very good investments. Cars that were featured in movies or have had famous owners will often make a car much more valuable and the potential increase in value shouldn’t be underestimated.
Classic racing cars are another Intresting investment opportunity. These can range from classic rally and touring cars to vintage F1 cars, and again there are investments are most price points and prices are rising across the spectrum. Famous cars with race history and wins will always increase in value and are excellent investments. Cars that are eligible for events such as the Mille Milia and the various classic race series are also in high demand. 1970’s and 80’s cars are also increasing in value in a similar vain to the modern classic road cars.
But not all markets have performed as well. The classic American muscle car market for instance has had its ups and downs in recent years after performing strongly. Think Shelby Mustangs, Dodge Chargers and Pontiac GTO’s. The same is true of collectible American cars from the 1950s. Values have stayed strong even during the recent crisis, however only the very best cars have been appreciating in value, in what continues to be a generally flat market place.
What are the risks of investing in classic cars?
There’s always a financial risk with every investment and investing in classic cars is no different and it’s important that you give these risks proper consideration before you invest. The most obvious risk is from market movements. Like most investments car values are constantly moving and the market doesn’t always go up, so you need to be prepared for these movements.
Also unlike most other traditional investments cars also require maintenance, which should be seen as a continuous cost above and beyond the initial investment. If you have invested in a highly specialist car you should set up a maintenance schedule in advance to help manage the ongoing costs. Consideration should also be given to where the car is going to be stored. Correctly storing you car is essential if you are going to maintain their value. You may be lucky enough to own a your own garage or store. If not you will have to rent suitable storage that will eat into any potential profits. Either way it is essential that you store a car correctly.
Another downside is that unlike stocks, shares and rental properties classic cars don’t pay any form of dividend or indeed any financial return until they are sold, and in most cases require an additional investment in ongoing maintenance and storage costs.
On top of that, if they’re driven they can be damaged or just loose value by simply adding more miles to the odometer. So this also needs to be considered.
You might also have to pay tax on your investment depending on where you live. However in certain countries like the UK, classic cars are exempt from capital gains tax, making them an even better investment opportunity.
As we stated above classic cars can be a very good investment and have easily outperformed stock markets, property, jewellery and just about every other tangible asset class. Making investing in classic cars a great opportunity and a great way to diversify an investment portfolio.
There are investment opportunities at almost every price point and cars to suit every taste. You can also enjoy owning and driving a classic and value can be added by way of mechanical and cosmetic repairs. There is also a well established social scene, shows, tours, trials and sporting events that you can attend. Making classic car investing event more Intresting.
We cover the two most common investing strategies here – Investing in classic cars: Flipping vs Buy-and-Hold, and you may eat to read our popular article Buying and selling classic cars for profit.
But classic cars aren’t the only way to invest in cars. Rare modern supercars are also a good investment and can offer similar returns on your investment. Demand for rare and limited edition supercars is high, and manufactures are responding with more and more limited production models. It’s a great time to enter the market if the have the means. Just remember to follow the rules of supply and demand and it’s hard to go wrong. We have written an article about it here – Flipping Supercars.