Investing in your passions can be extremely rewarding and for many of the world’s wealthiest people this means investing in classic cars. Making passion investments not only allows you to enjoy your wealth but also diversifies your portfolio and has the potential to provide a return.
Today the London Classic Car Show begins and 40,000 owners, collectors, experts and enthusiasts will attend so I’ve decided to write an introduction to classic cars as a passion investment.
Firstly, like any passion investment, and I have previously said the same about investing in fine art, I don’t believe you should invest in classic cars unless it is a real passion of yours. That said, there are still returns to be made and over the past 20 years cars have made phenomenal tax free gains. While this has slowed over the last couple of years, according to the 2017 edition of the Coutts Passion Index since 2005 average prices of classic cars rose fourfold.
This increase coupled with the tax exemption of cars is a big lure for those thinking about them as investments but they also require a significant amount of upkeep and maintenance, more so than some other passion investments. Classic cars require huge amounts of maintenance and original parts can be rare and expensive.
While investing in classic cars is not one of my passions, I have helped many of my clients find their next car investment or seek specialist advisors and over the years I have gathered that there are a few key considerations when it comes to investing in classic cars.
1. Seek Independent Advice
For those who want to start investing in classic cars the first thing you should do is to seek independent advice. For every model there are thousands of particulars that affect the value of the car and an independent advisor can steer you towards good investments. They can also help you by inspecting and verifying potential acquisitions for authenticity to make sure you’re not duped by unscrupulous sellers.
2. You Need To Love It
There’s no guarantee that any classic car you buy will appreciate so like any passion investment make sure you buy a car for the love of owning and driving it. To minimise risk it’s also a good idea not to view cars as a central component of your investment portfolio and to only use surplus funds after the base and core elements of your portfolio have been set.
3. Rarity is Key
Rarity is a key driver of demand and asking price with classic cars along with owner history. The cars that command the most value have had as few owners as possible and come from low-production runs. Provenance and the profile of past owners also has an impact on the value and stability of a car’s worth.
4. The Less Restoration The Better
A car in an unrestored state means it won’t have had patches cut out and welded in and it can be restored to the highest standard. Finding classic cars in an unrestored state is becoming more of a rarity but with the right connections or broker you have a better chance of hearing when such cars become available, often when an owner dies.
Along with these considerations, the main piece of advice everyone who invests in classic cars gives is to not lose sight of the joy to be had from classic cars and to remember that you’re buying them first and foremost as a hobby, rather than an investment.
If you’re thinking about investing in you passions, please don’t hesitate to get in touch with me and I would be delighted to make an introduction to the right specialist to help you.
If you found this week’s article useful, I would be very grateful if you could let me know by leaving a comment.