Classic Cars: Passion or Profit?
WHAT MAKES COLLECTING CARS SIMILAR TO OTHER ASSETS?
Like fine art, many collectibles have seen significant appreciation in value over the past decade. This includes classic cars; which collectors purchase because they are passionate about the cars and can enjoy the asset. Unlike a stock or a painting, part of the fun is that the collector can drive a classic car.
Just as with art, the collector should obtain professional advice to choose a classic car wisely. A collector needs to understand the market and ride out the fads and will usually have to keep a classic car for several years before noticing any potential appreciation.
A collector also needs to be aware of the provenance of a car, understanding its history. Has it been well maintained? How many owners has it had? Has it been shown or won awards? If it has been restored, when was it done and by whom?
WHAT ARE THE BIGGEST CHALLENGES TO COLLECTING CARS?
Because of the illiquid nature of classic cars, there are several issues for collectors to consider. For instance, while a stock can be sold rapidly, finding a buyer willing to pay the asking price for a vintage car may take time, and the interest in different makes and models will differ. These longer cycles may not necessarily correspond with the collectors need to convert a classic car into cash.
While hunting for classic cars is exciting, it is important that collectors plan for their collections. A key issue is capital gains taxes. If the cars are appreciating, collectors should talk with a financial advisor or accountant regarding how to minimize the capital gains. Global trends and tastes change so it is important to follow the market and monetize when demand is strong.
Another concern is that vintage car parts may not be readily available. Since finding replacement parts for a rare car may be difficult or expensive, a newer collector may want to choose something not extremely rare.
It also may be difficult to find a good mechanic. The process of diagnosing automotive problems by sound alone is becoming a lost art. Modern mechanics rely on a host of computerized readers to determine what is wrong with an engine, and that equipment does not work with antique and classic cars.
Storage fees are yet another concern. Depending on how many cars a collector owns, special classic car storage facilities may be required.
CAR COLLECTING TRENDS
Factors such as scarcity, brand, age, condition, provenance and desirability can affect the value of a classic car. A supercar may be a high-risk investment, but it could be very lucrative. The most profitable supercars tend to be models that are in development and up for sale prior to delivery.
According to Steve Linden, classic car expert and CEO of Chrome Strategies, the interest in Preservation Class cars, ‘survivor cars,’ continues to grow. These are cars that are in good condition and have not been restored. Collectors face difficult choices in deciding whether to restore classic cars or leave the vehicle in its original state. The best appreciating classic cars are ones that were produced in limited runs and aspirational vehicles even when they were new.
FURTHER READINGS
- Art, Cars & Collectibles: How to Mitigate Risk Before a Disaster Hits
- Market for Sport Memorabilia Continues to Score Big
