Is it worth investing in the classics?
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Is it worth investing in the classics?

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A classic car is a vehicle that defines an era. These vehicles can change the “rules of the game” in automotive technology when they are introduced to the market, or they can be industry icons that make them sought after by collectors.

A car with racing history enriches its pedigree and increases its appeal among potential buyers. Carroll Shelby or Raymond Loewy classics are good examples of cars that remain relevant decades after their release. Celebrity ownership of a specimen can also contribute to collector potential. Cars owned by Hollywood legends such as Steve McQueen and Paul Newman represent a specific era and span an entire generation. The market for classic cars is similar to the market for works of art or collections of rare gold coins. Collectors buy vehicles both for their aesthetics and their potential to increase in value over time.

So what are some examples of classic cars? And are they worth buying and holding on to for years with the hope of selling them for a big profit in the future?

What to invest in?

It can be difficult to choose the right car to invest in, especially one that will yield an excellent return when sold. The list of classic cars with multimillion-dollar price tags, when adjusted for inflation, is quite short.

Buying a new car or a recently manufactured model in hopes that it will become a classic is a risky move. An example of this is the release of the Dodge Viper in 1990. Many collectors bought the Viper and kept it in hopes that the car would be worth millions. These potential investors believed that the car’s unique styling combined with its 645 horsepower V10 engine would make it an instant classic.

However, they were wrong. Today, you can buy a 1993 Viper for less than $40,000. Considering new ones cost $50,000, that’s a 20% loss on your initial investment. Factoring in inflation makes the loss even worse.

Is it worth investing in classics?

Investing in a classic car is a long-term, multi-year investment. Sure, you may find a good deal in the short term, but such cases are rare in this market.

The primary risk is that you won’t get back the money you paid for the vehicle. If you’re buying a classic car not just as an investment but for the added enjoyment of driving it, you also run the risk of diminishing its value because most classic car buyers want the lowest possible mileage. Also, repairs can be expensive because parts are hard to find. Most classics are not designed to today’s common safety standards, which makes them risky to drive. In addition, you will need a transportation company to transport such a specimen.

Return on investment

The luxury classic car market can offer impressive returns if you have the right model.

Ferrari released the Dino 246 GT at a price of $14,500 in 1974. At the same time, they released the Dino 308 GT4 at a higher price of $22,000. Collector car dealer Hagerty currently values the 308 GT4 at $49,000 and the 246 GTS at a staggering $417,000. This is a rare example of an entry-level model surpassing the top model. In 2014, British auction house Bonhams sold a 1962 Ferrari 250 GTO for a colossal $38.1 million. At the time, it was the highest price ever paid for a car. The Mullin Automotive Museum purchased a Bugatti 57SC Atlantic (1 of 4 produced) for between $30 and $40 million in 2010. A 1954 Mercedes-Benz W196 Silver Arrow sold at auction for $29.7 million in 2010.

All of these vehicles are examples of the best-case scenario for car collectors. However, the chances of finding such a deal are slim. Even if you do, you will need a huge amount of cash to invest in these vehicles.

(Photo: pixabay.com)

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