Everyone knows that saving money is essential. However, with the US’s current inflation rate around 8.5%, the value of cash savings is actually being diminished as time progresses. Intelligent investors may look toward alternative assets that appreciate instead of depreciate.
Buying classic cars can be a way to achieve this goal. They are an investment that doesn’t just hold their value but exceeds it. Let’s take a look at why collecting cars can be a sound financial decision.
Why Should You Buy Classic Cars?
Classic cars are one of the most well-respected forms of investing in physical assets. After all, humanity has been collecting and reselling cars since their invention.
Part of the advantage is their high value. A classic car is worth a lot more than a baseball card and, thus, is a better way to invest a large amount of money in a physical asset. After all, it is easier to invest in one classic car than several hundred classic baseball cards.
Another advantage is the ageless appeal of cars. While fashion might change from year to year, the appeal of specific car models is timeless. Many buyers out there are still attempting to buy cars that were made nearly a hundred years ago.
Having a time-honored investment is crucial because you know its value will extend into the future. You want to be sure your investment will pay off, and having an investment that withstands the passage of time is one way to do this.
The Market for Classic Cars
Because collector’s cars are popular, their market is equally robust. Collecting vintage vehicles is a popular pastime among many with disposable income.
This makes it easy to find car shows and auctions, where new vehicles can be bought and old ones can be sold. There are also hundreds of private sellers out there who can deal with you personally.
An active market is an essential part of any investment. It makes it so that there are good options out there for you to purchase. It also means that you will get a fair price if and when you decide to sell.
An active market also gives this asset liquidity. This is the ability to find a buyer and sell off your asset quickly. While this might not be necessary, it is essential in emergency situations.
Increasing the Value of Classic Cars
Many who purchase classic cars as an investment work on them in order to increase their value. As most classic cars are decades old, many have seen better days. Bringing them back to their former glory increases their value even further.
The first step in this process is finding a car that needs work. In most cases, a beat-up classic car can be purchased at a bargain compared to one in its prime.
However, not just any old car will do. It is essential to be knowledgeable of how much certain vehicles are worth and how much the restoration process will cost. Otherwise, you will end up spending money that you will be unable to recoup.
During the restoration process, it is important to make sure you know what you are doing. Improper maintenance or alterations can decrease the value in a way that can never be undone. This may be a time to look into professional services.
However, if one correctly approaches this process, it can be very lucrative. Like house flipping, car flipping makes money. Plus, many end up enjoying the buying, restoration, and selling process.
Also, keep in mind that this is all value being added on top of the already increasing value of the car. A classic car in poor shape will still increase in value as time progresses. Restoring it simply adds more to this increase.
Using Classic Cars to Avoid Inflation
Buying a classic car can be helpful because it helps you store your money in a way that avoids inflation. Inflation is a feature of the economy that devalues the value of money in your bank account.
Right now, the average interest rate for savings accounts in the US is 0.06%. With inflation at over 8%, this means that nearly every bank account out there is simply depreciating in value. A $100 bill sitting in the bank will be able to buy less in five years than it can today.
However, appreciating assets, like classic cars, can rise in value faster than a bank account would. This is because their value, like most goods, rises with inflation but, unlike most goods, rises even further due to their rarity.
Because of this, appreciating assets can combat inflation and increase the value of your savings. They allow you to invest your money instead of just letting it sit.
There are other types of appreciating assets out there, with most being physical assets. Real estate, precious metals, or gems and jewels all have a value that rises over time. However, there are advantages to owning a classic car that none of these provides.
Classic cars are collectors’ items from the past that can never be fully recreated. A company can rerelease a classic car from the ’40s, but it isn’t the same as a car that was actually released in the ’40s. That original piece has a special value that rises because of this.
Classic Cars as a Hobby
One of these advantages is the fact that classic cars form an entire hobby on their own. A key reason buying classic cars is so appealing to so many is that it is fun. Jay Leno famously used his fortune to dive into the hobby and buy more than 180 cars and 160 motorcycles.
Many buy classic cars just to keep them around. They expand their garages to fit multiple cars. Then, they add lights and decorations that will highlight the cars as they sit there.
A garage with classic cars essentially functions as an art gallery. Every car is a combination of engineering marvels with an artistic shell. Those vehicles that have become classics perfectly combine these two factors.
Those who can appreciate these features can appreciate what it means to own a classic car. Plus, a beautiful car in the garage looks much better than a bank statement’s numbers.
There are also clubs and associations that focus on car collectors. Joining these can be a great way to make connections and expand your social network. It can also be a great way to learn about the hobby and discover the best places to buy and sell cars.
This hobby can also extend to other vehicles. For example, many motorcycles hold their value in a way similar to cars. Dipping into this aspect of the hobby opens up an entirely different driving and collecting experience.
Driving Classic Cars
Another reason investing in classic cars is better than investing in other things is that you can drive a classic car. This may seem obvious, but it is not something that should be overlooked.
The benefit here is mostly personal. Driving a classic vehicle can be an incredible experience that does not compare to a modern one. This can make taking the car for a spin an experience all on its own.
It can also be a great way to enhance a night out. Showing up to a classy event or fun party in a classic car gives the entire night a feeling of importance.
If you end up joining a car club, you may even get the experience of driving multiple cars. You can test out cars owned by your friend to see how you like them. Plus, some car clubs have cars owned by the club that members can borrow when they want.
However, investors should be careful when taking their car out for a spin. Doing this often ends up putting wear and tear on the vehicle that will not be appreciated when reselling. In addition, it opens up the possibility that the car will be involved in an accident.
This is why it is important to be careful when driving. You also want to make sure you have a robust insurance policy that will cover the value of your car if anything happens.
Classic Cars as a Status Symbol
Cars, in general, have been a status symbol for generations. Owning a classic car essentially catapults you to one of the top tiers of this social ladder.
Despite social status seeming like a frivolous thing, it has benefits. Arriving at a meeting or business function in a classic car immediately demonstrates your value to those around you. It can create a first impression like no other.
If you are looking into making other expensive purchases, arriving in a classic vehicle tells the seller that you can afford it. The seller may end up treating you differently because of this.
As mentioned above, cars also open your social network. Any type of connection can be a good addition to your social sphere. However, the people who collect classic cars are usually people who are well-off, which makes them even better connections to have.
Overall, a classic car can have an impact on your life that you may have never even considered.
Things to Keep in Mind Before Buying
Now that you can see the advantages of investing in classic cars, you may be tempted to run out and make a purchase. However, there are some things you should definitely know before you do so.
The most important factor here is research. Before making any investment, it is important to do a lot of research. Classic cars are no different.
You should look into different car models. As you do so, keep in mind which ones are expected to rise in value and which ones you like for yourself. Finding a mix between these two factors will help guide you toward your future vehicle.
You should also be knowledgeable about cars in general. If you know nothing about cars, you will know nothing about caring for your vehicle and ensuring that your investment lasts for years. Learn more about how a classic car works and about general car maintenance.
Be Aware of Additional Costs
When budgeting for your new vehicle, it is important to keep some room in the budget for other purchases.
Make sure you can afford the insurance on your new car. Research options and find out how much they will cost you.
Be aware of the upkeep costs. If you don’t plan on doing all of your maintenance work yourself, you will probably have to make a few visits to a mechanic over the years. Planning for this will prevent you from being disappointed in the price when that time comes.
If you plan on fixing and flipping your car, keep in mind how much those additional parts will cost you. When flipping a car, you don’t make any money until the end, so you must be sure you can afford everything as you reach that goal.
Read also: The Top 8 Classics Any Vintage Car Collector Should Own
How Buying Classic Cars Helps You
There is a wide range of reasons to invest in classic cars. Doing so helps fight inflation, stores the value of your investment, can grant additional earnings and is simply an enjoyable pastime. For these reasons, buying classic cars helps financially and personally.
Want to learn more about luxury cars and yachts? Read more at Luxtionary.
Featured image source: Thestatesman.com