Emotions and investing are not good bedfellows as a general rule and becoming too attached to an asset you own, has the potential to cost in more ways than one at some point.

There must a good number of people who have at some point regretted selling a car that they cherished and even more galling is the added insult that their much-loved vehicle has now become a classic car and an appreciating asset for someone else.

The classic car market has been a real boom and bust story at times and developed the equivalent of a rotten floor pan in the early 1990’s, with prices falling through the floor and dropping from previous highs by as much as 40% in some cases.

The bubble bursting fall in classic car prices was supposed to be a salutary lesson for investors that cars are just a commodity and should be viewed accordingly when considering their investment potential.

This is easier said than done when you get your first sight of a car made by someone like Ferrari or Lamborghini and suddenly they seem like a great buy, if you have some cash to splash.

The fact of the matter is that some classic car prices have actually been recovering quite impressively since that early 1990’s collapse in the market. According to a study carried out by the private bankers Coutts, they found that certain classic models have risen by over 250% between 2005 and 2013.

Classic car valuation experts Hagerty produce a number of indespensible collector car indexes, which allow you to see clearly what is happening to prices in the U.S and around the globe.

Their indexes show that even if you are not in the market for a high-end classic car like an F40 or a Lamborghini Miura, if you invested in an affordable classic, which are collectible cars priced at under $30,000, you would have likely experienced better growth in values than those investors who concentrated on the top tier of classic car speculation.

Hagerty’s Affordable Classics Index has risen by 7% in 2015 alone, so you clearly don’t have to spend vast sums of money to turn a decent profit if you buy wisely with your head leading your heart, as far as that is possible when the subject is cars from our youth.

The sentimentality aspect is definitely still a strong factor in the classic car market and if you can combine the pleasure of buying a car that you have long admired or perhaps even used to own, and also make money on it as an investment, that is quite an attractive proposition.

As this data illustrates, classic cars overall have outperformed gold and the FTSE 100 since 2009, and some of the the ten top performing cars have been been able to generate returns of over 200%, which are figures that many fund managers can only dream about.

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The question being asked is are we heading for another classic car bubble, or is there an opportunity to add some classics to your garage as a viable alternative investment strategy?

Some industry observers believe that this time the price rises might be more sustainable as we are not looking at a bubble financed by borrowing. Instead, people are spending hard cash from savings and pension pots. Add in growing interest from emerging markets such as India there are potentially more buyers after the same number of cars than ever before, which should help to sustain valuations.

Advice from the experts

The best advice when it comes to buying a classic car is to buy the best model that you can find for the budget that you have available.

Some people who bought with their heart rather than their head have still managed to make money but nothing beats doing plenty of research in terms of values and other aspects that affect values.

Classic car valuations are very sensitive to things like appearance, scarcity value, history and condition of the vehicle and image. How it is perceived as a desirable vehicle or a design classic can make a fair difference to prices.

Other things to consider are the mechanical profile of the car in question and whether it has any known issues and also whether it is considered to be a good car to drive. The more boxes you can tick, the greater your chance of making a potentially viable investment, but there are definitely no guarantees in that respect.

Rather like collecting art, it often works well to buy a car that you really want to own and then view any subsequent rise in value as a bonus. That may seem to be conflicting advice, but at least if you are prepared to adopt that approach, you can keep expectations in check and it might even help with your tax situation as well. This is because in the UK, if you drive the car it will be exempt from Capital Gains Tax whereas a car bought purely for investment purposes will be taxed accordingly.

Winners in the last five years

The art of classic car investing is spotting trends with certain models early enough to be able to enjoy the ride as prices start to react positively to a rise in popularity.

Here are some of the classic cars that have turned out to be winning investments over the last five years, which will give you an idea of the potential and could be helpful in working out what cars and models might develop into future classics, based on what has been successful most recently.

Screen Shot 2015-05-21 at 08.55.50The Lotus Cortina is a great example of a classic car investment that can deliver surprisingly good returns for a relatively modest capital spend.

If you had bought this car in 2009, it would have cost you £20,000 and today it commands a price tag of £60,000.

The porsche 911S was produced between 1967-1973 and positively encouraged drivers to lean heavily with their right foot. This 911S cost £34,750 in 2009 and the price has accelerated to £100,000 today.

Screen Shot 2015-05-21 at 08.56.35The BMW 503 Coupe, which was produced between 1956 and 1960, is a good example of how a model can become more popular as a collectible classic than when it was in the showrooms.

The Coupe was an expensive luxury car that appealed to a limited market at the time. Now seen as a design classic by collectors, an outlay of £60,000 for this model in 2009, would see you get closer to £130,000 if you decided to sell.

Classics of the future

Having seen some of the success stories of the past, if you are considering a reasonably modest investment in the classic car market, the big question is which affordable cars might become the classics of the future and deliver potentially stellar returns?

Cars that carried a high price in the first place, tend to grab the headlines when it comes to classic car sale prices, but you don’t have to have a budget big enough to buy a Ferrari in order to invest in a car that could become a future classic and rise in value as a result.

Some fairly standard models from the 80’s and 90’s have a good chance of achieving classic status because they have the chance of attracting sentimental investors who are keen to seize the opportunity to return to their youth and get behind the wheel of a car they perhaps used to own.

This is why a car like the Citroen XM is considered a good candidate for future classic car status.

The fact that the Citroen DS and CX have now become classics in their right means that it doesn’t require a large leap of imagination to consider that the XM will follow suit.

You should be able to buy an XM for between £1,000 to £3,000, which represents a much lower risk than gambling a large chunk of your cash on a badge that comes with a much bigger price tag.

Another potentially profitable strategy is to try and spot cars that are design classics but have yet to achieve true recognition as a classic car.

Screen Shot 2015-05-21 at 08.58.27The Audi TT is a good example of this. You can acquire an original TT for somewhere between £2,000 and £8,000 at the moment, but some motoring experts believe that these prices could rise when the market awards it classic car status.

Scarcity is another reason why some seemingly modest models can appreciate in value. The Subaru Impreza Turbo was popular with motorists when it first came out but early models are becoming harder to find, which is already leading to values rising.

Many British men of a certain age may well have owned a Ford Capri at some point in their driving history and this model is a perfect illustration of how even a high volume production-line car can enjoy a rise in value, long after depreciation was supposed to have rendered their value to junk value.

Prices of Capri’s have virtually doubled in the last 18 months and they still seem to be rising.

There are any number of affordable cars that could become future classics and buying a model that you might have driven in your earlier days, is not a bad starting point for enjoying the chance to bring back some memories and also potentially profit as values rise in the future.

It seems that you can put a price on nostalgia, but that is not the only reason to consider classic cars as viable alternative investment, although you always need to be mindful of the potential for huge volatility in prices, if market conditions or sentiment changes.

Elizabeth Goldman is the editor of AlternativeInvestmentCoach.com. She has written for Investing.com, Bullbearings.com and many others.