Classic cars are a popular alternative investment at the present time and there has been a recent surge in values across all types of cars from modest mass-produced classics right through to the high-end sports cars like rare Ferraris that command stellar prices.
There is a Blue Chip index of classic cars compiled by Hagerty, a specialist in this market. They report that the prices of the 25 most sought-after post-war cars have at least doubled since the beginning of 2010 and classic car investment is attracting investors with varying budgets.
If you had bought an MGB for about £5,000 about 5 years ago, this same car is now fetching an asking price of £10,000, so is this a good time to consider investing in classic cars as part of your overall portfolio?
What motivates you
One of the characteristics of classic car investment is how buyers are divided by their main motivation for buying a vehicle in the first place.
If you are motivated by the potential profit to be made, you will want to store your acquisition away in a secure environment and wait for it to rise in value over a period of time.
This is the opposite approach to the other breed of classic car investor, who wants to enjoy their purchase and treats their car buying as a hobby and wants to keep their car on the road and have some fun with it as well as hoping to make a profit at some point in the future.
Keeping a car on the road is going to cost extra money in addition to your initial outlay, so if driving a classic car on a regular basis is your main motivation for buying, you need to factor running costs into your budget.
To get an idea of the potential profits that could be made from investing in the right type of classic car, here are some examples of models that have soared in value.
These examples are based on the typical purchase cost in 2011 and what they are estimated to be worth now.
Jaguar E-Type – Around £40,000 – now fetching in the region of £120,000
Aston Martin DB5 Sport Saloon – Selling for £140,000 in 2011 and now worth about £320,000
Bentley S2 Continental Flying Spur – Selling for £44,000 then and now valued at £70,000
These are examples of some models that have risen in value and as time goes on, their rarity can also help to keep prices high. There are also plenty of examples of cars that have not performed so well or even lost money, so classic car investment is not an easy way to make money, especially if you are not particularly knowledgeable about the market.
Tips for investing in a classic car
If you are considering buying a classic car as an alternative investment, here are some tips that you might want to consider that apply apply whichever country you live in.
The rarer the car you buy, the higher your costs will be for parts and labor when fixing the car and maintaining it.
Classic cars are not normally very complicated compared to modern vehicles and if you invest in a modern classic like a Ford, you should be able to source parts relatively cheaply.
Always try to buy the best car that you can afford. This is the most common piece of advice that you will hear from classic car owners and is worth heeding.
You will probably achieve the most added-value to a classic car if you can pick up an unloved classic at a reasonable price and have the resources or knowledge to restore it to its former glory.
Classic car investments can be rewarding financially and spiritually, but do your homework and only invest what you can comfortably afford, regardless of whether it is a hobby or just an investment strategy, or both.
Learn more about Classic Cars as an Investment Asset at The Classic Car Fund.