Classic cars as an investment

Savvy investors with an affinity for rare, valuable objects have made classic cars a valuable part of their portfolios. While collectors can earn big returns on such vehicles, many of them are car aficionados who find their greatest rewards come from the experience of owning and maintaining the vehicle.

If you’re considering collecting as an investment, it’s important to understand what makes a classic car.

Classic cars date back at least 15 to 25 years, but more importantly, possess some quality that makes them interesting to collect. This may include unusual designs and limited production runs. The rarer the car, the more valuable it is likely to be. Cars more than a century old fall into the separate category of antiques.

As you would for any investment, research what you are interested in buying carefully. Weigh each deal independently and make a sound decision. That means finding a car that meets your budget, is in good shape and is likely to have strong resale value.

More investors than ever are looking at classic cars as an alternative to traditional stock or bond investments. That’s largely because it can lead to major profits. Between 2004 and 2014, the Knight Franklin Luxury Investment index noted a 500% increase in the value of classic cars, according to U.S. News and World Report.

For example, the 1954 Mercedes-Benz racecar sold at public auction for a record $30 million in July 2013. Juan Manuel Fangio, a legendary Argentinian-born driver in the 1950s, raced the car. Part of its appeal was that it was largely unrestored and still had scuffs from racing – something that buyers today covet.

While few investors will have the fortune to make a record profit like that, it’s not too late to own and enjoy a classic. The classic car market evolves over time and cars that carry high prices at one point may dip, while others that cost less may see a jump. It’s important to track the market for the best investment opportunities.

Buying into classic car investing

Thanks to the Internet it can be relatively easy to track the cars that interest you. At Hagerty, Nationwide’s partner for classic car insurance, you can find valuation tools and a classic car newsletter. There are also classic car auction sites such as Barrett-Jackson, or Russo and Steele that can help you spot trends.

The process is more than just a numbers game. Find a car you like. A fondness for a model and the pleasure in owning it can soften the blow if the market suddenly devalues your car. A classic car, in which you take pride and build an attachment, is far different than owning stocks and bonds.

Also, it’s important to consider just how rare a car is. Before investing in a classic car, find out just how many cars of that make were built. That will tell you something about the car’s worth. If there were only 1,000 ever built, this bodes well for the ultimate price you may be able to get if you resell it.

Starting out is easier than you might think

Classic car investing is not limited to the super high net worth investor. For example, you can, purchase a car in the $20,000 to $30,000 range. That 1965 Mustang you were hankering for in high school can be had these days in the $20,000 range. But, don’t just snap up any random ‘65 Mustang.

As a smart shopper, you’ll want to ensure that a car wasn’t in an accident. You’ll also want to determine that, if it was restored, it was done so properly. An original car with its original parts is a particularly good find.

Mistakes to avoid

With any classic car purchase, it can be helpful to hire a certified appraiser or consultant to provide feedback on a potential purchase. While this may add to your buying costs, these professionals can diagnose issues and save you money in the long run. Hiring an expert will ensure that you’re vetting an investment wisely.

It’s important to avoid buying anything on impulse or because you know somebody who’s offering a classic for sale. You could end up with a car you can't sell that’s taking up space in your garage, or you may have to pay far more in restoration costs than you could hope to recoup.

The cost of owning a classic car goes beyond a simple paper investment. Before handing over your check, you must also think about maintenance, restoration and storage costs, as well as the need for classic car insurance – which differs from ordinary car insurance.

Ultimately, if you vet your car wisely, you may find yourself with an investment that not only looks good on paper but also carries you back to the good old days on Route 66 and beyond.