Is Investing In A Classic Car The Next Investing Craze?

by Hank Coleman

Investing in a classic carAre classic cars good investments? Is investing in a classic car the next big investing craze? If so, is it right for you?

With TV shows about finding, fixing and flipping classic vehicles all the rage right now, it’s no surprise that investors burned by the real estate crash who are looking for a new get-rich-quick scheme are finding this one. Investing in a classic car offers the lure of a hefty potential profit, with a far smaller outlay of capital than a house requires. But is it a good investment — something you should consider to help diversify your investment portfolio?

If you’re thinking about investing in a classic car, you don’t want to lose your shirt in the process. Here are some things to consider before you take possession of a pink slip:

Don’t Invest in a Classic Car on Impulse

Is Investing in a Classic Car Right for You?“Never buy a classic car on a whim,” says Ryan Guina, a classic car owner and publisher of the website Cash Money Life. “It’s important to familiarize yourself with the market before buying so you know you’re getting a reasonable deal.”

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The old adage is true: Your profit is made when you buy the item for a great price.

The old adage is true: Your profit is made when you buy the item for a great price — whether it’s a car, house or any other investment. Counting on your ability to negotiate an exceptional price when you sell later is a poor way to make money.

Do You Want to Drive Your Classic?

How long do you plan to drive the classic car that you bought for an investment? Will it be your everyday vehicle? Would you be happy if your classic car was your primary mode of transport for a while?

You need to remember that it might take you some time to fix and flip your car. So, consider buying a car that you not only know about but also are willing to drive for a while if you need to. You don’t want to get stuck with a car you only bought because you thought it was a good investment.

Don’t Forget the Extra Maintenance Costs

Classic vehicles can be expensive to fix and maintain, and you can’t let those costs sneak up on you. It’s just like factoring in maintenance and vacancy costs into the rent you charge as a landlord: If your margins don’t include a cushion for “unexpected” maintenance costs, you’re much less likely make a profit on your restoration.

Get Car Insurance Designed for Classics

Guina says it’s a good idea to purchase specialized car insurance. “I was surprised at how inexpensive my insurance policy was on my 1973 Corvette,” he says. “The best way to find a good deal is to shop around for an insurance company that specializes in classic cars.”

Those types of insurance companies might very well be the best route for you and your investment to ensure that it’s properly covered.

Much as prices do for fine wines and baseball cards, the values of classic cars can fluctuate over time — they don’t simply depreciate like new cars start to do the moment you drive them off the lot. You’ll want to make sure that your insurer considers recent sale prices from reputable auctions and other venues when it values your classic car.

Do You Need a Dealer License?

Every state has laws on the books that address car dealer licensing requirements. For example, Florida considers anyone who sells three or more cars in a 12-month period a car dealer. The practice of buying and selling a lot of cars without a dealer license is known as “curbstoning.” Not only is it illegal, it can also be a red flag for buyers — which can make reselling your restored classic more difficult.

So if you’re buying and selling a lot of classic cars in a single year, you should consider getting a dealer’s license. That often will entail shelling out for an annual fee, insurance, bonding, and other costs.

Whether you’re trying to make a quick buck flipping or simply looking for a sweet ride to refurbish and drive yourself, a classic car can be a lot of fun and a great investment. But as with any investment, there’s a lot to consider before you buy.

Have you bought and sold a classic car? Did you start out just looking to flip it for a profit? Or were you after an everyday driver to enjoy before selling? Are classic cars good investments?

Note: This article originally appeared on AOL Daily Finance and is reprinted with permission. See the full article on AOL Daily Finance.

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About Hank Coleman

Hank Coleman is the founder of Money Q&A, an Iraq combat veteran, a Dr. Pepper addict, and a self-proclaimed investing junkie. He has written extensively for many nationally known financial websites and publications. Hank holds a Master’s Degree in Finance and a graduate certificate in personal financial planning. Email him directly at Hank[at]MoneyQandA.com.


Hank Coleman has written 581 articles on Money Q&A. Learn more about Money Q&A on Twitter @MoneyQandA and @HankColeman.


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{ 3 comments… read them below or add one }

mike

Unless you have good mechanical knowledge I would avoid the classic car market like the plague.
Lots of dodgy sellers
Lots of cars are real lemons
Sure there are bargains to be had, but unless you can do the majority of the fixing up yourself, the potential profits will be eaten up in mechanics fees

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Marie @ Gen Y Finances

I think investing in a classic car is not really a good idea. The cost of maintenance would be pretty high unless if you have a bit knowledge about cars and how to fix them if ever that you have a problem with the car.

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Dylann Andre

For me, investing in a classic car is not that practical. This is only fit for those who have more than enough in their bank.

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