Classic Cars as Investments?
Brad Kline - September 09, 2020
There are many things to consider when looking to buy a classic or collectible vehicle as an investment. I’d like to go over some of those things to help anyone thinking about buying for investment purposes.
The first thing to consider when buying an investment piece is condition. Are you willing to fix a few things, or do you want to buy a car and put it away without touching it? For some cars it is all about originality. While other cars can be worth as much or more when restored. A lot of that comes down to the rarity of the vehicle. If this is a 1 of 1 car that was highly optioned, or had the biggest and baddest engine offered, then originality is typically more desirable. If you’re looking into restomods or street rods you will be looking at restored vehicles. That is where the quality of the restoration/build becomes most important. Making sure the car was built right and good parts were used will determine the vehicles current and future value. If it is slapped together with bondo and the paint was poorly done, the car is going to get worse as time goes by. Meaning the value will actually go down over time! That is certainly not what you want from an investment standpoint.
The next thing to consider is rarity. There is a common misconception that rarity equals value. It doesn’t always. The cars that are valuable due to their rarity are rare because someone spent EXTRA money to get that car or that option. Let me give you an example. A 1971 Cuda with a 426 Hemi from the factory is valuable because someone spent $700 more to get a 426 instead of a 440. Most people looked at that and thought “why would I pay more money for a smaller engine?” So, they didn’t. The people that splurged were few and far between. Meaning those cars are now rare, and incredibly valuable. That car might have been $3,500 then and it’s worth $100,000+ now. On the flip side of that is the guy who went into a Chevrolet dealer with a flyer in hand that said “1970 Chevrolet Nova starting at $2,200!” and he bought that car. He got a 4 door, 6-cylinder, 3 speed manual, manual steering, manual brakes, no A/C, heater delete, radio delete, bench seat car with hub caps. That car is rare because most people spent $10 to get a radio, and $5 to have heat, and $25 for power steering, etc. That car is rare because most people weren’t that cheap, and they spent a bit more to have some options. That car was worth $2,200 then and it’s worth $7,000 now. Not a great investment! People aren’t looking to buy the cheapest or lowest optioned versions of something. They spend money to get the best engine, highest trim levels, most options, etc.
The third thing to consider is what is up and coming in the market. What age group has the money right now and what age group will have it when you want to cash out on your investment? Let’s say you want to hold onto a car for 5 years and then sell it for a profit. Who will have the disposable income in 5 years? Typically, people in the 35-60 range are the ones spending money on “toys.” So, in 5 years (2025) who will fit that age bracket? They will be people born mainly in the 70s and 80s. Starting to touch on people born in the 90s as well. What did their parents drive? What did they have in high school? Or maybe their best friend had in high school that they wished they had? Those are the cars that people buy. The car they remember riding around with their dad in. Their first car. The first car they took a date to a movie in. The car they took their wife on a first date in 20 years before…. For that age group and that time frame, it’s not the cars from the teens, twenties and thirties anymore. That is why those cars have been decreasing in value in recent years. Even the 40s cars are starting to get harder to sell and bringing less money. For that age group discussed above the cars would be from the late 60s on up to the late 80s. We are already seeing that trend as 78-92 Camaros are increasing in value. Fox body Mustangs are climbing. Square body Chevy pickups and OBS Ford pickups are climbing as the 100-year old cars decrease in value.
I hear people say that classic cars are a dying hobby or that no one is interested in them anymore, and that’s just simply not true. The market is changing for sure. It is not dying by any means. I have been doing this for 12+ years and have seen the market roll over time. What I mean by that is I have seen when the 1917-1934 cars were incredibly hot and bringing big money and the 70s and 80s cars were essentially worthless. I watched at the cars from 1917-1923 dropped in value rapidly while early 70s cars surpassed even their late 60s counterparts in value. The 1924-1934 cars dropped as the middle to late 70s cars started to climb in value. Cars that were bringing $3,000 were now bringing $30,000 just a few years later! Now the 1934-1942 cars are slowly decreasing and getting tougher to sell as the 1980-1990 cars are climbing and getting more desirable. It’s not dying, it’s just rolling on to a new generation. If you understand that trend, then you can make very good money investing in the right cars from the generation that will be increasing over the next 5-10 years!
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