You can make quite a bit of money investing in classic cars – the 1972 Ferrari 365 jumped considerably in value from 2008 to 2015, from $160,000 to about $450,000. But it’s not easy to make money investing in classic cars. If you want to earn any return, you need to follow the right strategies and have a passion for what you’re buying.
SHOP FOR RARER CARS
The rarer a classic car is, the better. Rarer cars tend to be more highly sought after, so you can command a higher price for them, especially during bull markets. For this reason, you should stick to Porsche, Ferrari, and other German and Italian auto manufacturers, because they didn’t make as many cars as American manufacturers.
EVALUATE THE CONDITION
You generally want to go with the older car whenever possible, given a choice between two model years of the same car. However, age isn’t all that’s important, as condition also plays a significant role in the car’s value. If the newer car has much lower mileage, more maintenance records, or more of its original equipment, you may want to consider buying it, instead.
MAINTAIN A DIVERSE PORTFOLIO
“Diversify your portfolio” is a common expression among stock brokers, and it applies to investing in classic cars, as well. If you buy just one classic car and hope it goes up in value, you’re essentially gambling. You have a coin flip’s chance of making money. Instead, do your research and make several informed buying decisions. You should have a range of cars that could all potentially go up in value, that way you can hold them until their values go up.
FACTOR IN ADDITIONAL COSTS
Here’s one major difference between owning a stock and owning a classic car – you don’t need to change your stock’s oil or perform any other sort of maintenance on it. With a classic car, you’re going to need insurance, a safe place to store it, and money to restore and maintain it. If you don’t drive the car much and are holding it only to sell it later, you can keep these expenses to a minimum, but they’re still present. Just remember that your expenses don’t end with a classic car when you pay for it.
The classic car market isn’t the way to go if you’re trying to get rich quick. Most classic cars hold relatively stable in value, and a few go through occasional price fluctuations. There’s money to be made if you have the right car during one of those price fluctuations, but you need to be patient as you wait for your investment to pay off. You also need to keep your classic cars in pristine condition while you wait for the right time to sell. Since these investments can take a long time to pay off, make sure that you either pay in cash or choose a loan with a very low interest rate. Using a loan with a high interest rate, such as a vehicle title loan, to buy a classic car will cost you far too much money.
If you want to succeed in classic car investing, a passion for automobiles is a prerequisite. It’s the only way that you can handle keeping cars maintained while patiently waiting for them to increase in value.
Photo Credit: McLaren