Millions of American automotive enthusiasts and savvy investors alike collect cars. That old muscle car or the British roadster you inherited may still have a place of honor in your garage and see use as a weekend cruiser. Thinking about this as an investment, a restored vintage Volkswagen Beetle or an original Z32 Nissan 300ZX Twin-turbo can be purchased for less than $30,000, driven lightly for years, and then sold for a modest profit.
Keep in mind, that classic cars date back at least 15 to 25 years, but most importantly, possess some quality that makes them interesting to collect. Yes, that means the Pontiac Aztec we all loved to make fun of will likely be collectible. This may include unusual designs and limited production runs. The rarer the car, the more valuable it is likely to be. Cars more than a century old fall into the separate category of antiques.
As you would for any investment, research what you are interested in buying carefully. Weigh each deal independently and make a sound decision. That means finding a car that meets your budget, is in good shape, and is likely to have strong resale value.
More investors than ever are looking at classic cars as an alternative to traditional stock or bond investments. That’s largely because it can lead to major profits. Between 2004 and 2014, the Knight Franklin Luxury Investment index noted a 500% increase in the value of classic cars, according to U.S. News and World Report.
So what are driving values? Scarcity for sure, the Internet for another. The amount of information available on the Web, as well as the ease with which data can be found, has removed a lot of the footwork necessary to ensure a particular car is worth purchasing, says Alain Squindo, chief operating officer at RM Sotheby’s, an auction company that specializes in rare and collectible automobiles.
“It’s a much faster and effective way to research cars” that has allowed many more people to become savvy investors, Squindo says. As with other types of alternative investments, such as works of art or wine, classic car investing for many is a passion. And much like those investments, buying a collectible car needn’t require an extraordinary amount of money. Paying under $20,000 is “perfectly reasonable,” he says.
The Market for Classic Cars
Thanks to increasing global wealth chasing a limited number of vehicles, the market for classic cars has done better than collectibles like coins and stamps over the past decade, sometimes even beating the broad stock index. The Historic Automobile Group International (HAGI) tracks the collector’s car market with a number of indexes. Its broadest is the HAGI Top Index, which tracks vintage collectible cars from Porsche, Ferrari, Bugatti, Alfa Romeo, and other brands.1 The Top Index was up 33.78% for 2019; although affected by the pandemic, it still managed to increase by 6.19% in 2020, and 2.73% in 2021 year-over-year.
Another classic car index is run by the insurance company Hagerty. Its market index, an open-ended inflation-adjusted index based on the change in dollars and volume of the market, is up 21.49 points from Dec. 2020 to December 2021; the value of its market rating, which measures the current status of the collector car market in terms of activity, accelerated to a five-year high in December 2021.
At the high end of the classic car market those selling for more than $1 million you’ll find relatively obscure older brands such as Hispano-Suiza and Delahaye, as well as names that are still well-known today, such as Rolls-Royce and Jaguar. Even brands not known for high-end exotics may become collectible: Toyota’s beautiful 2000GT, built from 1967 to 1970, can command more than a million dollars at auction. A 1934 Packard Twelve 1108 Dietrich sold for $1.435 million in 2021, and a 1995 McLaren F1 sold for a record $20.465 million at an August 2021 auction in Pebble Beach, Calif.
What Makes a Car Collectible?
Cars with historical importance ones that pioneered new technology or raised the bar for consumer expectations can become collectible, especially if they are rare and beautiful. (Being good-looking is an advantage.) A racing history adds to a car’s allure, as an association with a respected designer, racer, or builders such as the likes of Raymond Loewy or Carroll Shelby. Prior celebrity ownership can also help, especially if the individual is associated with cars, such as Steve McQueen, Paul Newman, or James Garner. The most expensive collectible cars combine these attributes.
As a basic rule of thumb, if teenage boys or girls have pictures of cars taped to the wall, you’re looking in the right direction. When those children grow up, they want to buy the things that made them happy in their youth.
Car Investing Risks
Just as most investments carry fees, so too do classic cars. This is tangible personal property, and you’ll owe capital gains tax if you sell at a profit. Is your collectible in bad shape? Restoring a seven-figure car to Concours condition, generally considered bringing an older car to showroom-new condition using original or exact recreations of parts, paint, and bodywork can cost another seven figures. Then there are ongoing maintenance costs, storage expenses, and insurance. Profits from the eventual sale of the car will also likely incur commissions/consignment fees, transaction fees, and transportation costs because chances are you aren’t going to tow a Bugatti behind a U-Haul.
Buying a new or newish car because you think it will be collectible someday is risky. Sure, you could get lucky, but chances are you aren’t going to be able to buy a cheaper car and expect it to be worth millions in a relatively short period.
When the Dodge Viper was unleashed in the early ’90s, some collectors squirreled them away as investments, believing that the aggressively styled sports car with a then-ludicrously-potent 400 horsepower would certainly appreciate in value. But you can currently pick up a 1993 Viper (the first full year of production) for, on average, $45,700 (under $40,000 if in good or fair condition); they cost more than $50,000 new.56 These investors may have enjoyed showing off their cars and occasionally blasting down an open road, but with inflation, upkeep, insurance, storage, and opportunity costs, they most certainly did not make any money.
The same thing happened a couple of decades earlier when Cadillac announced in ads that the 1976 Eldorado would be the last convertible the brand offered. It wasn’t. You can now find well-cared-for Eldorado convertibles from that vintage for less than $25,000. They cost $11,000 new, which is $47,000 adjusted for inflation.
Affordable Options? Possibly.
One could argue that the American Viper and Eldorado are at the affordable end of the collectible spectrum; not the high-end stuff that tends to come from Europe. But the same uncertainty applies to the high-end market. In 1974, Ferrari sold the Dino 246 GT for $14,500 and the 308 GT4 Dino at a significantly higher $22,000. Currently, Hagerty lists the average price of a 1974 Ferrari 308 GT4 at $48,000 and a same-year Ferrari Dino 246 GTS at a whopping $340,000.78
So, what are the ultimate collectible cars? It’s hard to say definitively. Tastes change over time, private sales are difficult to track, and the high end of the collectors market focuses on exceedingly rare cars with differing histories. The list of sales that are confirmed to exceed $30 million in inflation-adjusted dollars is extremely short though.
Certainly, the Ferrari seems to lead the pack. The British auction house Bonhams sold a 1962 Ferrari 250 GTO for $38.1 million in 2014, which at the time was the highest confirmed and published price ever paid for a car. The race car had been driven by legendary driver Stirling Moss at the height of his career. That record got broken in 2018 when another 1962 Ferrari 250 GTO was sold by Sotheby’s for $48.4 million. (Another 250 GTO reportedly exceeded $70 million in a private sale.)9
In 2010, the Mullin Automotive Museum purchased one of the four achingly beautiful Bugatti 57SC Atlantic ever built for what an insider described as between $30 million and $40 million. In 2013, a 1954 Mercedes-Benz W196 Silver Arrow the only car of its kind not in a museum sold at an auction in the U.K. for $29.7 million.
Not Just for the Wealthy
There’s an app for that, Rally RD is an investment app that buys some of the best collectibles to invest in like classic cars, and turns them into stock shares anyone can buy. The main benefit of investing with a classic car app is the time and cost savings.
Time-wise, you don’t need to source and authenticate these vehicles. And cost-wise, you don’t have to pay for storage, insurance, transport, and maintenance costs. Rally doesn’t even charge a fee. In other words, you can gain exposure to the price appreciation of the classic car without the expensive downsides. When you’re ready to exit, just sell your shares on Rally’s secondary market and drive into the sunset.
The Bottom Line
Becoming a collector of high-end cars can take pretty significant investment and comes with not-insignificant carrying costs. As tastes and economics change, what was once worth a king’s ransom could depreciate to a mere princely sum, so choose carefully. Red and Italian tend to be good bets, but be aware of over-frothy markets.
For example, wealthy Japanese buyers couldn’t buy enough Ferraris in the second half of the 1980s and prices saw an unbelievable spike and then a bubble. When the Japanese stopped buying those prices dropped by a big percentage. Buy quality (a prime example will always be marketable and command a premium), know your demographic and market factors, and make sure you’re not buying while in bubble territory.
