The Pros and Cons of Investing in Classic Cars

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classic-car1Financial advisors often state the importance of diversifying your investments, in order to avoid putting all of your eggs in one basket. In addition to stocks, bonds, and savings accounts, another option is to choose an alternative form of investment.

If you have a particular interest in wine, art, or antiques, this could prove to be a satisfying way to invest your money as a collector. The same principle holds true for classic cars.

Classic cars are extremely diverse in terms of type, age, and price. Although most investors won’t make a killing on a classic car, owning and maintaining one can serve as a hobby as well as an investment. There are a number of advantages and potential pitfalls associated with this type of investment, however, so it’s worth examining the pros and cons in greater detail.

Pros of Investing

One of the major benefits of investing in classic cars is that it is an enjoyable pursuit. If you love the look and heritage of classic vehicles, owning and maintaining one can be a fun way to put your money aside. For truly classic cars, there is a limited supply, which means that if you can find one in good working order you stand very little chance of its value depreciating.

Another option for investing is to buy into a classic car investment fund, which buys classic sports cars like Ferraris which you wouldn’t be able to afford on your own. Investing in a fund also allows you to avoid the additional maintenance costs. Another advantage to investing in cars is that this allows you to diversify your assets, with plenty of options to choose from.

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Cons of Investing

There is some risk inherent in investing in classic cars, and if you don’t know the market very well or have limited funds to work with you may end up with an asset that depreciates in value. You’ll need to not only look at classic Ford or Volkswagen offers but also look at the history of each car to choose wisely.

The stock of classic cars is a limited supply. Although this guarantees their value, it also makes it difficult to buy in at an entry level. Maintenance is another factor to consider. Unless you plan on buying classic cars through an investment fund, you need to think about keeping your car in top condition to keep the value up. Although it’s fun to drive your car, you’ll need to limit use to restrict mileage and keep it in its best working order. Spare parts for old or obscure models can also be quite pricy.

The Bottom Line

There are a number of factors to consider before you take the plunge and invest in classic cars. For most collectors, it’s better to view them as a hobby rather than a true investment. Many models depreciate over time unless they come from a truly limited or exclusive run. Yet if you have the time and money to spare, it can be a rewarding and fruitful pursuit.

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