Classic cars are vehicles that are 20 years old or older. They’re lauded for their craftsmanship, style, and innovation that reflect the era they were made in. Some classic cars are so valuable they could fetch over half a million dollars, and the rarest cars are valued even higher.
There’s no doubt that classic cars are highly valued. But are they a good investment? In this guide, we detail the pros, cons, and tips when investing in classic cars.
Should you invest in classic cars?
Investing in classic cars could be a good idea. There’s certainly a market for it and theinvestment returns could be quite significant. However, it all depends on your financial situation and investment goals. Classic cars are one of the top-performing investments in the last twenty years. Many investors from all over the world have included classic cars in their long-term investment strategies.
Classic cars have sold for impressive figures in recent years. For instance, a Ferrari 290 MM was sold by RM Sotheby’s LA for a whopping $22,005,000 in 2018. More recently, at a 2022 auction, the Mercedes-Benz 300 SLR Uhlenhaut Coupé was sold for a staggering €135,000,000 or an estimated $216,923,612 (yes, that’s a lot of zeroes).
In Australia, a 1957 Ferrari 500 TRC Spider by Scaglietti was sold for $11,270,000 at the 2022 Monterey Auctions. An estimated $667,000,000 in vehicle sales was sold at that year’s auction in only a few days. Suffice to say, there’s a live and thriving market for classic cars in the country.
The classic car market in Australia has low spreads and volatility, but with high liquidity. While other types of cash-related investments are affected by inflation, tangible assets like classic cars are not. Unlike regular cars that easily depreciate, classic cars are good at retaining their value.
Reasons to invest in classic cars
In addition to their high value, here are some of the advantages of a classic car investment compared to other modes of investment:
- Classic cars have great value appreciation. These cars increase in value at a higher and steadier rate compared to other collectibles.
- There’s a global market for it. The market for classic cars goes beyond Australia. The larger market and interest are advantageous when it comes time to sell the classic car.
- It’s a great way to diversify your portfolio. If you’re looking to invest in something other than stocks, bonds, or real estate, a classic car is a good addition because it’s a different asset class and holds its value well through time.
Risks of investing in classic cars
Of course, like any investment there are drawbacks. Keep these pitfalls in mind so you can properly strategise and minimise risks when investing in classic cars:
- Classic cars need maintenance. The parts for classic cars may be hard to find or are expensive. Also, consider the storage costs.Depending on how many classic cars you buy, you may need a special facility to house your investments.
- Insurance costs. You need to safeguard your investment against damage and theft. Insuring a classic car will give you extra protection in case anything happens.
Factors you need to consider when investing in classic cars
When it comes to investing in classic cars, not just any old car will do. A good classic car for investment must be rare or unique and in good condition. Look for classic cars that had limited manufacturing runs or are special editions. Having a collector’s item means there’s a high level of scarcity which means it could garner a lot at auctions.
Another good criterion when looking for a classic car is desirability. You should get the pulse of most car buyers to find out which car model is more coveted. The higher the demand for a classic car, the higher its purchase value will become.
Find a classic car in good condition because it will be worth more compared to those with rust and faulty engines, no matter how unique or rare they are. If the car has retained its original paint, parts, and specifications, then it will have a higher market value. Don’t forget proper documentation because this will prove the authenticity of the car and prove its value.
Classic car investment strategies
There are a few ways you can maximise your classic car investment. Check out these investment strategies when you sell your classic car in Australia:
- Buy-and-hold – This involves buying a classic car and holding it for a long time until it accumulates value. You can buy a classic car and wait for it to become valuable over time. Or invest in a car that could turn into a classic car, however, there’s more risk in this move because it doesn’t always pan out.
- Short-term speculation – For those who want to turn a quick profit, short-term speculation is the way to go. Instead of holding the classic car indefinitely, you sell it quickly as a response to market trends. This involves a lot of market research to ensure the best profit.
- Restore and flip – This is much more labour-intensive compared to the other two strategies, but it could garner a better return on investment. This strategy involves buying a classic car in poor condition and restoring it to its former glory. Once the classic car is restored, you can put it back on the market.
Think about your investment goals to see which strategy is the most profitable for you. Carefully review your options and figure out what suits your financial situation most.
Resources for classic car investors
Classic cars, especially the most high-end ones, can be challenging to sell privately. This is where auction houses and car dealerships come in. These are popular avenues for classic car investors to sell their vehicles.
Because the classic car market is pretty niche, networking within classic car clubs and communities is important. You can gather valuable information and gain insight into the market. Also, when you have a good network within the classic car community you have a better chance at finding a private buyer for your classic car.
Get a classic can loan with Aussie
Despite the risks, investing in classic cars can still be worth it for some given the high returns they can yield for the high returns they can yield. Now that you know what to look for in a classic car and specific models worth investing in, you can start working seriously on a classic car investment this year.
To help finance any classic car you find at an auction or in the market, you can reach out to Aussie Car Loans for the best classic car finance deal.
Are classic cars sound investments?
Classic cars can be a sound investment option for many, depending on ones own individual financial circumstances. Historically, it has been one of the top-performing investments during the last twenty years (although, past performance is not indicative of future performance). Many investors, not just in Australia, have included classic cars in their long-term strategies.
What makes classic cars a good investment?
Classic cars make a good investment because they have great value appreciation, a global market, and it’s a good way to diversify your investment portfolio.
What is a classic car investment strategy?
A classic car investment strategy can help you maximise your profit when selling your classic car. There are several ways to invest in a classic car such as buy-and-hold, short-term speculation, and restore and flip. Consider these classic car investment strategies thoroughly to find one that best suits your investment goals.
What are the risks of investing in classic cars?
Since it’s a long-term investment, a lot of things can affect the condition of both the market and the classic car. Specifically, the car is at risk of damage and theft. If you’re investing in a classic car, then you should also get classic car insurance to safeguard the asset.
Aside from the cost of insurance, this investment will also cost you extra cash for adequate storage space. Most classic car collectors buy humidity tents, which are dry and capable of preventing corrosion build-up on the vehicle. Caring for the engine and other car parts will also incur an additional cost.
How do I determine the value of a classic car?
Classic cars can be appraised by a professional or you can use classic car valuation tools to get an idea of how much your vehicle may be worth.
What are some examples of successful classic car investments?
Some of the most successful classic car investments in Australia include a Volkswagen Kombi Van that sold for $200,000 with less popular versions selling for $145,000. Another great classic car investment is the Holden VF Series which was sold at auction for $750,000. The original retail price for this vehicle was $65,000.
How do I protect my investment in a classic car?
You can protect your classic car investment by doing regular maintenance and having it insured. Other ways you can safeguard your classic car includefinding a good storage facility, doing research, and taking it out for a drive to ensure it’s in working order.