Beyond their cultural significance and aesthetic appeal, classic cars have piqued the interest of investors looking to combine their interest in automobiles and the potential for financial gain. But with recent legislation banning the sale of gas-powered vehicles after 2035, an important question arises: are classic cars good investments in 2023?
Are classic cars good investments in 2023?
Classic cars are a good investment in 2023 if you are someone who knows their way around the classic car market. For unexperienced investors purchasing a blue chip classic car is almost guaranteed to bring in profits. But when blue chip classic cars are too expensive venturing into more common classic cars could be risky.
Is there a future for classic cars?
In February 2023, the European Union (EU) adopted a legislative change that completely phases out the sale of new gas-powered vehicles after 2035. California approved similar legislation thereafter, with other states expected to follow suit.
This begs the question: is there a future for classic cars after 2035? More importantly, what does this mean for current and soon-to-be classic car owners and investors?
Classic and vintage car owners shouldn’t worry about the future of their beloved vehicles. Even with the introduction of these laws, classic vehicles will always have a place in the market for several reasons.
The legislation bans the production of new cars rather than the sale or use of older cars, so classic car owners can continue to sell and drive their cars without the limitation of these new regulations.
And, as Allan McNish, champion racing driver, puts it: a classic car doesn’t need to be driven to have real value.
Most valuable classic cars aren’t driven but rather stored in perfect condition to prevent deterioration and keep a low mileage. So even if the car isn’t actively driven, it can still hold significant value due to its historical significance, rarity, and overall condition.
So to finalize that:
Verdict: Is there a future for classic cars?
Classic cars do have a future as new gas regulations are intended for the production of new vehicles not the operation of them. Even if worse comes to worse, classic cars will still hold great value even when being still and motionless.
Will classic cars hold their value?
The answer to this question isn’t as nuanced as a simple yes or no. The value of a classic vehicle is determined by several factors: Rarity, historical significance, and performance.
Rarity plays a significant role in determining the value of a classic car. In most cases, the rarer the car, the higher the value.
The 1961 Ferrari 250 GT California SWB Spider, for example, has a market value of between $16 million and $18 million because only about 55 of them were ever made.
The same is said for the 1962 Aston Martin DB4 GT Zagato, with an estimated value of $14.3 million (only 19 produced), and the 1964 Ford GT40, with an estimated value of $6.93 million (only 124 produced).
The major selling point of rare classic cars is exclusivity. Owning a rare vehicle sets its owner apart from the crowd, adding to the prestige and allure of these cars. Well-off collectors are willing to pay a premium for the privilege.
The historical significance of a vehicle adds an extra layer of desirability among collectors and car enthusiasts. Classics that played a role in shaping the automotive industry or are associated with iconic events, figures, or movies skyrocket in value due to their unique position in history.
A prime example of a historically significant car is the Ford Model T.
Introduced in 1908, the Ford Model T, often referred to as the “Tin Lizzie,” played a major role in making cars accessible to the common people. It transformed the way people lived, traveled, and worked, spurring the development of roads and reducing the dependence on horse-drawn carriages and trains.
The Ford Model T falls short in terms of modern practicality, but it doesn’t stop investors from spending significant sums to acquire and preserve these iconic vehicles.
Owning a well-preserved Model T holds a special place in the hearts of those who recognize its pivotal role in shaping the modern world.
Vehicle performance is another contributing factor to the value of a classic car.
A handful of classic vehicles were ahead of their time in terms of handling, engineering, and speed.
The 1993 McLaren F1, for example, was the first production car to reach the 240 mph mark with a naturally aspirated engine. Today, the McLaren F1 retails for up to $20 million.
Classic cars with exceptional capabilities command higher prices because they offer a unique driving experience. They’re one of a kind, setting them apart from most other classic and modern vehicles.
So to summarize the question of classic cars holding their value:
Verdict: Will classic cars hold their value?
Certain classic cars will almost always hold their value. The characteristics of these vehicles usually incorporate a mix of these elements: rarity, good performance, and some form of historical significance.
Should I invest in classic cars?
A well-maintained classic car can offer better returns than traditional investments like stocks or bonds. But it’s worth noting that this asset class is different than other more common types and may prove risky or difficult to liquidate if you are not experience enough.
According to a 2023 wealth report conducted by Knight Frank, vintage cars have risen 118% in value over the past decade, surpassing the growth of art and jewelry.
But as with most investments, the classic car market comes with its own set of risks and considerations. While it’s true that some classic cars demonstrate impressive appreciation in value over the years (Renault 5 GT Turbo, Peugeot 205 GTi, Ford Fiesta XR2, etc.), it’s not a guaranteed outcome for all classic cars.
The value of a classic vehicle can vary based on rarity, make, model, condition, and market trends, making it less predictable than traditional financial markets.
Another important factor to consider is that classic cars are regarded as illiquid assets, meaning that they may take some time to sell.
Selling a classic vehicle isn’t as simple as trading stocks and bonds, as they require finding the right buyer and negotiating terms, or putting it up on the auction. This could impact your ability to access funds when needed.
Classic cars also require quite a bit of ongoing maintenance to preserve their value. Maintenance costs should be factored into your investment analysis, as well as storage expenses, restorative costs, and insurance.
What kind of ROI can I expect from a classic car investment?
Well-maintained and sought-after classics have shown average annualized returns in the range of 11% to 20%, with the top 10 best-performing vehicles yielding returns exceeding 50%.
The return on investment (ROI) of a classic car depends on economic trends, rarity and demand, condition, and shifts in collector preferences.
Nevertheless, it’s important to note that past performance isn’t indicative of future returns. Potential investors should always seek advice from experts and assess their financial goals and risk tolerance before investing in a classic car.
The question of whether classic cars are good investments in 2023 requires careful consideration and a well-informed perspective.
Like any other investment, there’s no guarantee of the success of investing in classic vehicles. The classic car market is complex and unpredictable, influenced by factors such as economic conditions, changing collector tastes, and broader market trends.
That said, classic cars have demonstrated the potential for appreciation over time, with certain vehicles experiencing jaw-dropping returns due to their rarity, demand, and cultural value. This makes classic cars a worthwhile investment opportunity.
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