Is A Classic Car A Good Investment?

During a struggling economy, investors often seek to stabilize their portfolios by turning to valuable commodities such as precious metals and fine wine. Classic cars have also become increasingly more popular for their investment potential, and they have been shown to perform better than the stock market for the past four years.

While the market for classic cars has been showing less volatility than more traditional investments, getting into this field is not for the uninformed. Like any investment, classic cars carry risks that can blindside those who have not done their research, and even due diligence does not guarantee that the car will appreciate enough in value to offset its costs. Experienced collectors such as Jay Leno, therefore, recommend that only those who are passionate about these cars should invest in them.

If you share this passion for classic cars and would like to own one of them, or already have one that you would like to improve, then you may want to consider how the following factors affect the value of your investment:

1.    Funding

Some classic cars can sell for an astonishing amount of money. In 2010, for example, a 1936 Bugatti Type 57SC Atlantic sold for over $30 million, setting a new record for the largest sale ever made for a car. Considering that the same vehicle sold for only $59,000 in 1971, you can see how classic car collectors are capable of receiving an enormous return on their investment.

The collectors who trade in vehicles of this caliber, however, belong to an extremely wealthy minority, which puts many of these cars out of range for the average investor. Even so, many classic cars are still reasonably priced and are likely to appreciate in value, such as muscle cars from the 60s and 70s. Still, these require a larger investment than say, a bar of gold bullion, which is why you have to carefully research which classic cars best fit your budget.

2.    Popularity

Unlike investment-grade precious metals, which can be used as currency, the value of a classic car varies according to external factors. Like a bad film that goes out of print, a hard-to-find classic car is not necessarily going to end up a collector’s item, especially if it sold poorly due to shoddy design. Even cars that have been consistently popular appreciate according to trends in the market, which means that the hot sellers of today may not be the same six months from now.

3.    Originality

Extensive knowledge of your vehicle comes in handy when making a purchase since there are a number of shady or incompetent sellers out there offering a “bargain” that turns out to be a poorly-restored piece of junk that becomes extremely difficult to resell. Classic cars in general have less liquidity than other types of investments, which is why buying a car sight unseen from sources such as Ebay is usually a bad idea.

Collectors also pay a premium for cars that contain all of their original parts, and those that have been significantly altered from numerous repair jobs lose a great deal of their value. An appraiser who specializes in classic cars can assist you in finding one of worth, especially since a poor restoration is not always easy to identify without a great deal of expertise.

4.    Restoration

One of the most cost effective ways to own a classic car is to find one that needs work and then restore it yourself. How much you spend on this project largely depends on the make and model of your vehicle as well as your skill level. Some classic cars, such as the Ford Model A, are designed specifically for the lay mechanic and require as little as a basic set of tools and an original car owners manual. Others, however, can be extremely complicated and may involve the added expense of a professional if you lack the experience.

Finding parts that work with your classic car can also make restoring one a hassle, since some of these can take years to find and cost a fortune, if you are able to locate them at all. While wealthy celebrities such as Jay Leno can afford to hire a machinist to make these parts, the average investor will want to stick with more popular cars with a healthy parts trade.

5.    Maintenance

The decades-old vehicles you see at classic car shows are not going to be the ones parked outside in the rain. Collectors invest a great deal of money in keeping their cars protected by temperature-controlled garages and maintained by experienced mechanics. Cars that don’t receive regular TLC rapidly depreciate in value, which is why you will need to budget both time and money to ensure that they remain in top shape.

As you can see, owning a classic car does not always lead to riches, but anyone who works on one of these beauties will tell you that they make a most rewarding hobby, especially for do-it-yourself mechanics who want to test their skills by restoring one to its original condition. Finding a decent repair manual, however, can be problem, which is why offers affordable, factory-issued online auto repair manuals for any American car released before 1990 to meet the needs of mechanics regardless of skill level.

Brandi Tolleson is a prolific writer on technical topics like investment, finances and technology.

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