Classic cars are a time capsule filled with memories of a time that no one will experience ever again. The old fashioned interior, the silky body work and the prehistoric roar of an engine from decades gone by make these cars a real treasure to keep hold of.
However, when it comes to investing your money, the idea of classic cars does not really spring to mind. With the rise of crypto currency and other avenues of investment, it wouldn’t seem very wise to invest into classic cars would it?
After all, vehicles are a physical asset that depreciates as much as a quarter of its value each year. Additionally, advances in the automobile industry effectively render these cars impractical to use or even to maintain.
This article will decide for you as to whether or not you should invest your money into the classic car industry.
What is a classic car?
To define a classic car it is about the way the car is treasured and loved more so than the actual age of the vehicle.
The HMRC definition for a classic car is when the vehicle has reached 15 years old in practice and you will be able to insure your car as a classic car once it reaches this milestone.
A further indication of whether or not a car deserves its “classic” status is if the car’s value has increased rather than decreased since reaching its lowest value.
For example, the Volkswagen Golfs and Ford Fiestas have appreciated in value rather than depreciated significantly in recent years. This can be largely attributed to the fact that they are very common as first cars.
This could mean your current car could be eligible for classic car insurance, who would’ve thought?
Rarity and authenticity
A further indication of whether or not a car defines itself as a classic car depends on its rarity and authenticity. For example the Aston Martin DB5 is one of the most famous cars on the planet; you will rarely see one anywhere. This is because only thousands of this model would have been produced.
The rarity of the DB5 has meant their value has skyrocketed, currently being valued at 1.7 million pounds in its best condition.
Condition and Mileage
When produced, classic cars were built to last decades but these vehicles can still be subject to wear and tear which will drastically affect the value of the car.
It is then important to take a detailed look at the car you are wanting to purchase as even minor bumps and scratches may drastically affect the car’s value if you are looking to sell it on in the future.
Mileage is also key to look out for as the higher the mileage the cheaper price you would want for the vintage car. However, those who buy vintage cars may not be looking to drive these cars a great distance so if this is the case for you then mileage is not as important as the condition of the vehicle.
Why should I invest in classic cars?
The classic car has become one of the best-performing assets of the last three decades. No longer are classic cars a fancy collectible that is on display in a millionaire’s garage. Investors are now using classic cars as part of their long term strategies and there is in fact pieces of evidence that prove this.
An example of this recent change in trend is through the famous Ferrari 250 GTO which was owned by Sir Stirling Moss. In 2002, this car was sold for 8.5 million dollars. 10 years later, the car sold for 35 million dollars which is more than four times the previous value. 2 years later the value was surpassed again with another 250 GTO being sold at 38 million dollars.
A second example comes in the form of another Ferrari which was the Ferrari F50. In 2013, RM Auctions sold an F50 for $783,044 and by 2017 a second F50 sold for 3.18 million dollars.
Historically the classic car market has been liquid with volatility and low spreads. Any change in supply and demand has a very small effect on the prices.
The Market
As the current classical car market is experiencing high activity at the moment, this makes it a good time to invest. Due to inflation, investors are not looking to cash investment programs and are rather investing their money into alternative assets such as wine, art and classical cars to protect their assets.
The sharp increase in demand for high yielding investments means that alternative assets such as classic cars are the best bet of many investors.
Market trends
Investing in the current market is not as simple as in previous decades. The Financial Times highlights that there has been a worldwide shift of investments to alternative assets and that this has been gathering pace for years.
This worldwide shift has meant that investors are including alternatives within their investment portfolios as a result of disappointing returns from mainstream asset classes.
This same article from The Financial Times says that assets held by the top 100 alternative investment managers have seen an increase to more than $4 trillion.
Alternative assets really are at the top of every investor’s agenda in recent years and they should be in yours.
Economic Cycles
An economic cycle is the natural rise and fall of an economy between when there are periods of growth and recession. Economic Cycles usually run a period of 4-6 years and this is no different when it comes to the classical car market. The most recent economic cycle in the classic car market started in 2010 and peaked in 2015.
As the current economic cycle started in 2018, this means that the peak of the classic car market is upon us within the next couple of years. Therefore, now should be a very good time to invest in a classic car and then see a return on this investment in a couple of years.
How to spot a future classic
So you have made the decision to invest into classic cars but you are not sure where to start. A recent trend that could pay dividends is buying potentially future classics instead of the iconic classics we all know and love.
There are a few tricks in order to identify these future classics such as rarity, attractive styling, desirability and also cars that feature revolutionary technology will have an increased chance of rising in value.
Future classics are also ideal as they can fit in with everyone’s budget rather than spending six figures on an italian supercar that might not return on your investment.
If you are still struggling to find any then here are three cars that could become a future classic.
BMW Z3
The BMW Z3 is a great-value small roadster. It has a powerful six cylinder engine and a very smooth drive. Additionally the model is not prone to rust over time making the car easy to maintain until you want to sell it on for a profit.
Most importantly the car looks fantastic with some great body work and added value coming from the fact that it is a convertible roadster.
The Z3 is also affordable with a current market value of around $4,000.
Honda Integra DC2
Valued at $14,000, the Honda Integra DC2 is one of the best handling front wheel drive cars ever made.
The Integra feels excellent to drive and has a powerful 4 cylinder engine that could rival any current sports car on the market.
Almost doubling in value in recent years means you should be looking to snap up these great Honda Integras if you want to see some return on your investment into classic cars.
Porsche 911 997
Priced at $27,500 dollars, the Porsche 911 is one of the most famous sports cars of this century. Fast, practical and also great looking, the 911 is a real steal if you are looking to invest into the classical car market.
Additionally the value of the brand itself means that Porsche’s have no threat of depreciating in years to come due to the fantastic reputation they have in the car industry.
Overall
Investing is a tricky business. Markets can fluctuate and it can be a risk to part with large sums of money with no real promise of a return on your investment.
However, when it comes to classical cars, the risk can be small and the reward can be great. Some future classics can be worth as little as $2000 and these values could almost triple in years to come.
Purchasing cars is always seen as buying a depreciating asset which will be worth far less in years to come. However, understanding how the classic car market works can help you take advantage of alternative assets that are accelerating in value in years to come.
Investors world wide are taking note and you should too.
Hi, my name is Matt Roberts, and I have been a financial analyst and advisor for the past 7 years.
While my job is based within the money industry, in my spare time I enjoy looking into potential new investment opportunities. From cryptocurrencies, to purchasing vintage cars, everything has the potential to gain you money if you are wise and make the correct investment decisions.
Through this site, I hope to educate others on investing in general, and hope to provide others with useful information that can benefit them and the opportunities they have. If you are not confident with finances, investing money can be a daunting step, however, it is a lot easier than many people are led to believe.
