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Should I invest in a classic car?

It is becoming a lucrative investment prospect.

The world of collecting is a fascinating one – there is hardly an item, however arcane it may be, that someone somewhere does not have an interest in collecting.

There are people who collect stamps, cigarette cards, beer bottles and even comics, among other items.

The world of collectors’ of Classic Cars and classic motoring memorabilia has moved from compulsive hoarding to that of a lucrative investment prospect and in the last 20 years, this trend has gone from a small group of enthusiasts to a multi-million dollar industry, encompassing businesses dedicated to acquiring and restoring desirable automobiles, to wealthy individuals who amass a collection of exotic and rare vehicles purely from a lucrative investment point of view.

In the United Kingdom, the United States and in Europe, the sheer quantity and scale of this business of collecting is mind-boggling and values over the years have shot up, particularly in respect of the more exotic and scarce marques.

But where does that leave you and me?

How do I, as a person with relatively limited means invest in this market?

As with any foray into a specialised investment niche, there are plenty of caveats that can trip up the unwary and inexperienced investor. In the case of motor vehicles, this is no different. Let’s have a look at some of these pitfalls.

Know-how

If you plan to buy a vehicle for future investment purposes and you are not familiar with values and saleability, it is best to do some intensive research or engage the services of someone in the know, before you make that purchase.

Remember that emotion can often override common sense and that old MG may bring you nothing but heartache.

Here are some of the common pitfalls when purchasing a vehicle for investment purposes:

  1. Check the general condition of the car from a mechanical and body point of view – costs to refurbish these items may far exceed the investment value of the car. Have an experienced, mechanically minded person check over the vehicle and if it has too much wrong with it, rather walk away and find something else.
  2. Purchase price – People will try and sell an old car on the pretext that it is worth a lot of money because of its age. Don’t be persuaded into the purchase but check classic car sources (Magazines, Marque clubs and websites) to determine the going prices.
  3. Is it a matching numbers car? This means that the engine and body are as they left the factory – this is an important factor in determining future investment values.
  4. Has it been brutally modified? An old Rolls Royce with an American V8 installed and modern mag wheels will not only look tacky but will require some sympathetic and costly refurbishment to restore it to investment potential.
  5. Is the registration in order? – if the car is what is termed a “Barnfind” in that it has not seen the light of day for a while, then registering the car without the original ownership papers could prove to be a problem.
  6. Provenance – a vehicle that has an ownership history incorporating a celebrity or famous public figure will have a value that is considerably enhanced, but check that this is a genuine provenance, or you could end up paying too much. A Rolls Royce that was once owned by Sir Elton John, could add as much as a 20% premium on the selling price.
  7. Make and model – Values of classic cars vary according to the model. For example, an Aston Martin DB6 will command a price 50% less than an Aston Martin DB5, even though they are very similar. The reason is simply that the DB5 became an icon by virtue of the fact that it featured in a number of the early James Bond movies.
  8. Scarcity – Some cars like the Lamborghini Miura have sky-rocketed in value due to limited supply and are sure to continue rising in value exponentially. The fact that they are indifferently built and horrendously expensive to restore and to maintain will be overlooked in terms of their investment potential.

In conclusion, be a little hard-headed about your purchase and restoration expenditure if you are buying for investment purposes.

If you are an enthusiast and want to buy for the personal joy and satisfaction of owning an iconic vehicle from another era, then you may not mind buying with your heart, but beware – what starts out as a romantic notion can swiftly become a financial and mechanical liability and a heartbreak.

You must be resilient and be prepared to get your hands dirty from time to time!

David Crossley, Business Manager, BDO Wealth Advisors

The views and opinions shared in this article belong to their author, cannot be construed as financial advice, and do not necessarily mirror the views and opinions of Moneyweb.

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Pay off your debt 1st !!!!!!!!!!!!!!!!

It depends on your viewpoint. I think this article will find interest among those who foresees a Zim type path for the SA economy. Winners in Zim borrowed to the hilt while the currency was worth something and used the borrowed money to buy assets that would hold their value when the crunch came, and come it did. Whether borrowings were then paid off after devaluation or whether the asset was outside of Zim jurisdiction was a further choice. You choose.

If you have no or very little hands on mechanical knowledge and experience, don’t do it. You’ll get ripped off by some mechanic, all your profit will end up in his pocket.

Same applies for other investments..

fin type just take your money leaving you with nothing, a car is at least functional!!

but yes unfortunately there is no easy money.

There is a close correlation between classic cars and for example wine farms. Both mean you have to start the game with not only the purchase price but the future operating cashflow.

If you bought a really good car/farm but could not fund a decade of fixing and maintaining and upgrading, you will sell it for less than (cost of capital adjusted) what you invested.

If you can buy it for 50, afford the next 60 to make it worth 250, then you did well.

Or, you just say you are writing off 25 of the 50 because you love cars and you want to drive it and use it and enjoy it. If you bought well you will sell it for 40 after 25 years – and that applies as well to a proper overlander project as it does to a 1950’s sports car that probably will not keep up with a modern Golf on a track.

Classic Car collection as an investment is a fringe topic, but well loved.

However, to determine what one’s return on investment you’ve made, will be difficult to determine by factoring in inflation over a decade or longer of ownership (and don’t forget to add up all the maintenance bills & insurance). A car that cost say ZAR5,000 in say 1960’s, was a hell of a lot of money in today’s terms….when a ‘good’ monthly salary was like R100p.m. back then.

There’s also a sound reason why “veteran/classic cars, boats under 10m length, aircraft under 450kg weight, artwork, jewellery” are EXEMPT from SARS’ Capital Gains Tax (under “personal use assets” classification)…for the simple reason that (for SARS) it’s not worth the fuss to enter into a potential dispute over classic car proceeds, where IF a ‘real’ profit was genuinely made, these incidents are so few and far between, and a profit is merely incidental at best.

Classic Cars have other non-monetary attributes (for the proud owner).

I don’t drink with the boys, don’t plat golf, don’t fish, don’t hunt, don’t have a boat, don’t do woodwork, did have an aeroplane, so I play with wheels. But tinker play sell and get another one.

So I lose a bit on each one but so what it’s less than buying a classic and then having to employ a mechanic/panel beater/ technician to keep it going.

Yes I would love an E type Jag or a DB4 or a little Lotus, Ferrari, Maserati……………..but also don’t want to live with my kids oneday.

For sure.

A wonderfully restored Morris Minor or VW Beetle 1500, I would be happy to live with…

To such owners, people do walk up to you regularly, and one has to decline all kinds of offers 😉

Your chances of selling a restored classic at a profit are almost zero. The work and financial input are almost never fully recouped. Rule number one is not to be fooled into looking at Dollar or Pound prices and doing today’s conversion. By the time you have shipped it over and paid for all the paperwork, you might as well have sold it locally for apparently less money. The only exception to this is when an enthusiastic overseas collector is prepared to pay you upfront and do all the expensive work for you.

Unless you got something exceptional, dont bother right now. Prices are tumbling globally. Plenty guys locally also cashing in their collections suddenly because our economy is shaky.

Just follow whats happening at the big auctions in the Northern Hemisphere so far in 2019.

Some of the richest people on the planet buy/invest in vintage/classic cars.

(Johann Rupert – comes to mind)

Daddy bought most of those and put up the museum and the technicians. In Trust We Trust

They all collect hi end cars, not a wrinkled old Anglia with more body putty then body.

What do you mean with “invest”? This economy is so bad that I have to continue to drive my old jalopy. It is now so old that it is probably a classic but with high kilometres on the clock 🙁

I rather get a rare classic watch, a rolex or the like of some sort.

worst case scenario you can always board a plane with it on you wrist.

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