The siren song of classic, or collector, cars has lured many an automobile fan onto the rocks. “Why settle for a car that goes down in value when you can drive one that goes up in value?” you might tell yourself as you buy a vintage vehicle you think has lots of potential.
But turning an antique bucket of bolts into a cherry ride takes know-how. “The reality of car collecting is that for every investor who cashes in big, there are hundreds who lose far more money than they make,” writes Kelley Blue Book editor and Forbes contributor Karl Brauer.
It’s a used car
At Money Talks News, we are big fans of driving used cars. (Read 10 Tips for Buying Your Next Car for Less and Why Your Used Car is Greener (and Smarter) Than a New Hybrid). Here’s why: The average new car loses 36 percent of what you paid for it in the first year, and 60 percent from the original price in the first five years, according to Kelley Blue Book.
A classic car is, strictly speaking, a used car. A special used car, to be sure. State Farm Insurance defines a classic as:
- A motor vehicle 10 or more years old, which is rare or of special historical interest because of exceptionally fine workmanship or limited production. A classic motor vehicle 25 years old or older is covered as an antique.
- Antique Automobile: A motor vehicle 25 or more years old.
Purchased thoughtfully and restored knowledgeably, some classic cars do appreciate. Plenty depreciate, though. You can’t know the market value of a vehicle until you sell it, and lots can go wrong before then. The market for collector cars, like markets for stocks or corn futures, is subject to unpredictable forces, like the larger economy and the changing tastes and emotions of buyers.
It’s not an investment, it’s a hobby
Financial newsfounder Stacy Johnson is a classic car fan. He loves these babies. He has owned and restored a 1958 Triumph TR3, a 1968 Mercedes 280 SL, an Austin-Healey 3000, a 1957 Thunderbird and a 1972 El Dorado convertible.
Stacy can testify to the pleasures of owning and driving a classic car that turns heads and starts conversations. He loves the thrill of restoring a vintage car to its former glory.
Yet he is the first to advise slowing down if you’re considering spending big bucks on a collector car. Think of it as a hobby, not an investment, Stacy says. If you make money, you can be pleasantly surprised, but don’t count on it.
Here, from the hard-won experiences of Stacy and others bitten by this bug, are 10 rules of the road for buying a classic car:
1. Get a professional inspection before buying
You can go online and research prices that restored vintage vehicles are commanding. There’s so much information out there that it’s possible to delude yourself into thinking you know what you are doing. You start dreaming of a slam-dunk deal when you find an old hulk at a bargain price.
Making a nice profit isn’t simple, though. Don’t buy a vintage car without having an experienced mechanic, whose credentials you know and trust, evaluate the vehicle’s condition and assess the cost of the renovation, Brauer writes.
2. Say “no” to rust
When you see major rust on a vehicle’s body, run. Rust damage makes it unlikely you’ll be able to restore a vehicle to classic condition, car-flipping expert Jeff Allen (of CNBC’s “The Car Chasers”) tells Mens Journal. However, Allen adds, “If I saw a bubble or two on a quarter panel that would not bother me.”
3. Research insurance costs
Surprisingly, insurance can be cheaper for antique cars. But there’s a catch: To get low rates you can’t drive your collector car much. Specialized policies for antique vehicles often have lower premiums because the cars are babied and driven less.
“When it comes to insurance, there are a lot of different options based on how the car is valued and driven,” writes Property Casualty 360, in an article exploring those choices.
Even if you drive your classic, shop to compare policy options. You may be paying too much with a traditional auto policy.