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Is Investment in Classic Cars a Good Idea?

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Ford Mustang Convertible (1964)

1964 Ford Mustang
Photo: Wikimedia

Are classic cars a hot investment? It appears that the jury is still out on that one. Although classic cars have risen in value over the last 30 years, investing in a classic motor is not a guaranteed way to earn a decent crust. In fact, if you buy the wrong vehicle, you could end up losing a lot of money.

Millions of people are madly in love with their old classic car. Ferrari F40s, Shelby 427 Cobras, Corvette Stingrays, and Aston Martin DB5s are all sought after collectible cars and some collectors will pay a fortune for the right model in optimum condition. These cars are ultra-cool and represent the cream of the crop. But what you need to remember is that today’s old car is tomorrow’s classic. That old rust bucket gathering dust and cobwebs in the shed outside could be worth a packet in 40 years – that is, if it hasn’t fallen to bits in the meantime.

A Volatile Investment

The classic car market is notoriously volatile. Prices surged in the late 1980s with a Ferrari F40 fetching nearly one million at auction, but by the early 90s, the bottom had fallen out of the market and prices had dropped by up to 40%. Today, a Ferrari F40 is lucky to fetch £800k on the open market, and that is only if it is in mint condition.

Figures released by the Queen’s bank, Coutts, reveal that classic car prices have risen by 257% in 13 years. The Historic Automobile Group International concurs. They claim classic car prices rose by 12% in 2014 alone. However, experts warn that some classic car values have now plateaued and may not rise much further.

The problem with classic car investment is that not all models are equal. Some cars appreciate far more than others, so you need to know your cars before you snap up an old classic at auction. Vehicles associated with movies or celebrities are worth more. For example, the James Bond 007 connection has boosted the value of Aston Martin DB7s. Lotus Elans are also a smart buy, thanks to the Avengers connection. Any classic car associated with Steve McQueen is worth a mint, with his Ferrari 275 GTB fetching £6 million at auction in 2014.

Scarcity affects classic car values. Rarer classic cars tend to be more valuable. A Ferrari 335 Sport Scaglietti from 1957 sold for an astonishing £25 million in 2016. It was one of only four, but it also had an impressive history having been driven by Stirling Moss at Le Mans.

Classic car investors also speculate on which of today’s models are tomorrow’s classics. A classic Mark 1 Golf GTI from the 80s, a notorious ‘boy racer’ car, will fetch up to £15k if in mint condition. There are plenty of these cars still around, but nostalgic collectors love them to bits.

Compared to other types of investment, classic cars are a risky proposition. Investors typically ask what are CFD trading returns compared to classic cars and Google will reward you with a wealth of conflicting articles. Whereas with CFD trading, you never actually own the asset, if you buy a classic car you must pay for storage costs as well as other costs of ownership such as insurance and maintenance, so bear this in mind before you buy a classic car at auction.

The gas guzzlers of today could be worth a fortune in 30 years when the petrol engine has been superceded by energy efficient electric cars, so if you own an old motor, stick it in a garage and watch it appreciate in value.

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