Tips you can learn from the experts.
Among alternative asset investments, classic cars have been making headlines with record-breaking auction results worldwide, outperforming wine, watches, even fine art. In fact, classic car value has risen nearly 500% in the last 10 years and there is no signs of fading. Before you dig up that smelly old car your wife refused to be driven in, please note that not all cars are created equal. Just like any other investments, there is a lot of knowledge behind which car can or will become a future star. In this article, I will discuss the top 5 things you should know before starting your own classic car portfolio.
1- Buy what you like
If you are new to this and don’t know where to start, I suggest you find the dream car when you were a kid. Classic car is a passion investment you can drive it, be seen in it and most importantly, enjoy it. Like any other passion investment, always buy what you like. Regardless of whether you have made the right investment choice or not, you still would have enjoyed the ownership experience and started your journey on classic cars investment. Just like investing in wine and whisky, if you bought what you like, even if it doesn’t make you money at all, you could still enjoy a bottle or two on special occasions.
2- Research, Research and More Research
Learn everything you could about the car you would like to buy and find out the investment potential from all available sources. Buying a classic car doesn’t require an extraordinary amount of money, my childhood dream car was a Porsche 911 (Type 993). I bought a used one a while back at around 1/3 of the cost of a then new Porsche Boxster, the cheapest Porsche back then. According to my research, Type 993 value at that time seemed to have hit an all-time-low, but it was the last generation of “Air-cooled” Porsche, so I suspect it will be very sought after in the coming years. I was right, not only have I throughly enjoyed the car, it actually made me some money when I sold it 3 years later. If I bought a new Porsche Boxster then, it would have depreciated more than 50% in the same 3 year period.
3- Buy the best, the very best you can find
There are many factors that can affect a classic car’s value. Obviously you must check the car’s interior, exterior, mileage and mechanical condition. But intangible things such as originality, provenance (documented history), down to who owned the car, where the car was stored and serviced, play a very important role on the car’s overall value. Imagine there are 2 identical Aston Martin DB5 on the market, but one of them was well kept by a single owner with full history file and he is member of the Royal family. It’s obvious that this particular example would appreciate a lot more in the future. If you are in the market for a particular classic, whatever the price point, pick the best example you can find, even if it cost more, it will make you a lot more in the long run.
4- Buy something special
Special edition cars has limited production run (less than 500), these cars always have an engineering, mechanical or historic significance that is well sought after by collector and will appreciate a lot more than their regular counterpart. Sometimes, a particular car has a very limited run for Right-hand drive countries. In other instances, maybe the factory tailor-made a few manual transmission cars due to request from special VIP. Or due to racing homologation rules, only 500 street-going version of the racer were made to be eligible for racing. Think supply and demand. These special edition has a very limited supply so they can always command a premium and thus appreciates a lot more.
5- Factor in all the cost
Classic car ownership bring specific cost and benefit relative to other investment. When investing in a classic car, bear in mind these are not new cars from the factory, they don’t come with a warranty, so a lot more work and money needs to be budgeted along with the initial purchase price. You need to keep your investment in tip-top shape in order for it to appreciate so factor in insurance, cost of restoration, routine repairs, storage. If you are new to this, you may find someone who provides turn-key concierge service (an automotive equivalent of keeping yachts in a marina)
Classic cars represent a unique asset class- part investment, part thrall to automotive art and part childhood dream. Now that you have learned some of the secret to success, I hope you will find the classic car you love, drive it, treasure it and “enjoy the ride”.