Invest in Vintage Cars | Becoming a Vintage Car Collector
How to invest in vintage cars
A car loses much of its value the moment you drive it off the dealer’s car lot. After one year of owning a vehicle, it has lost 40% of its value. By the end of its third year and 10,000 miles, your vehicle will have lost around 60% of its value. Although many people claim buying a new car is a great investment, purchasing a brand-new vehicle is the opposite. Yet, there are certain vehicle purchases that are great investments.
Why invest in vintage cars?
Investing in vintage cars is not only a fun hobby, but a great place to put your money. Plenty of wealthy individuals invest in items to grow their portfolio as a hobby. Wine and whiskey are two popular hobbies/investments wealthy persons plow money into. Yet, these investments are easily lost. A broken bottle erases the investment you have made. While uncorking a bottle of wine and enjoying it for dinner does the very same. However, vintage car investments are not lost in the same ways.
Vintage cars do not simply sit in a garage under a sheet. Automobiles can still be driven and enjoyed by those who invest in them. Sure, you may still need to put money into your vintage car to keep it running, but those upgrades and modifications only increase the investment you have made. You should be able to recoup the money when you sell the car — if you do.
There are vintage car collectors who buy classic automobiles to place in their private garages. Yet, there are many more collectors that enjoy getting behind the wheel. Many vintage car collectors are automobile enthusiasts. They invest their money into something they love. Unlike buying stocks or properties, you can physically touch an automobile and experience it. Collectors also participate in car festivals. This is another way in which vintage car investors get the most out of their purchases.
Is collecting vintage cars easy?
Vintage car collecting is a way to diversify your investment portfolio. As previously mentioned, buying a brand-new automobile is a fool’s game as they immediately lose value when driven off the car deal’s parking lot. In contrast, vintage cars increase in value over time. Why? Vintage cars are rare and have special features you cannot find in modern cars.
Collecting vintage cars can be complicated. The storage space needed, insurance, and price to collect can be high in comparison to other collectibles. Some people may invest in coins, comics, or baseball cards, which are often easier to acquire and take up far less space. However, mint vintage cars can be sold for millions of dollars while other hobby investments cannot.
The top end of the vintage car market is occupied by rare cars and brands. These vehicles sell for over $1 million. Automobiles from Rolls-Royce, Jaguar and more obscure brands like Delahaye and Hispano-Suiza can fetch seven figures or more.
What Makes a vintage car collectible?
Vintage cars become a collector’s item due to a few factors. The most important is the historical importance the vehicle had on society. These vehicles often introduced new or advanced technology or increased the expectations of drivers. When you’re looking to invest in vintage cars, these are the diamonds in the rough.
The look of the vehicle is another key element in what makes it collectible. Brands or designers with a connection to auto racing also increase a vehicle’s allure. The most expensive vintage cars on the market often combine all of these elements into one package.
Another important factor in the interest in the collectible vintage car sector is its impact on pop culture. Men and women who drooled over certain cars as kids tend to seek out those models as adults. This raises the value of those automobiles.
Automobile investment is similar to art investment. It is something you can look at and enjoy. Cars can also be transported around the world enabling you to invest in a vehicle from another country.
Are there risks to invest in vintage cars?
Vintage car investment is not risk-free. There are no risk-free investments and anyone who tells you different is lying. Purchasing vintage cars can be pricey along with storage and insurance. In addition, as an automobile is a piece of personal property, you will need to pay capital gains tax if the car is sold at a profit — which it should be.
If your investment is in poor condition, it could take up to seven figures to restore it. Acquiring vintage parts and bodywork can be incredibly expensive. You could take a hit on the resale of the vehicle. You then need to consider the continuing costs to maintain the car and keep it in running order. Depending on how the vintage car is sold, you may need to pay a commission or fee to an auction house. Then there are transport costs, both when you purchase it and sell it.
Some investors purchase new cars hoping that one day they will become a vintage collector’s item. This is a risky maneuver as you can never predict whether or not a car of today will be a collector’s item in 20 or 30 years. While a Telsa driverless car has advanced tech in it today and many people want one, it could be a vehicle that no investor will purchase off you in three decades.
Due to advancing technology, we may not see the cars of today considered as highly as those of the 1950s, 1960s, and 1970s. Cars from the 1990s such as the Dodge Viper were popular investments when they were released. However, these cars have not appreciated and have gone down in price from what they were bought for as new at the time.
Becoming a vintage car collector
If you want to be a vintage car collector, there are really no cheap options. Taste in cars changes from year to year. A car that was previously worth a large sum may now be sold for far less. It is important to choose wisely when collecting vintage cars.
Just like in other investment areas, bubbles occur, spikes happen, and then the bottom falls out. While investing in vintage cars may be better than some other areas, remember that, as with all investments, it comes with a risk.
Originally published at https://sophisticated-investor.com on January 31, 2021.
