A Look under the Hood at Classic Car Buying as an Investment
Buying Classic Cars has been suggested by some as an alternative investment strategy. For me, every car I've ever bought lost value the minute I drove it out of the showroom.
In my younger years, I put my personal touch on my cars , pinstripes, the best sparkplugs money could buy, the best oil and wax too, but the value of my car continued to go down. What needs to happen in order for a car to appreciate in value over time? I'll do my best to give you the facts you need to see if it's a strategy that can work for you.
The first fact I uncovered was that a new car purchase will not gain value once that car is driven out of the showroom. Purchasing a new car cannot be considered as an investment for financial gain. It may very well give you some personal satisfaction, and that's okay as long as you just don't expect to make any money from that. This is the point where you have to decide if that new car smell really worth all the fuss?
A new car will depreciate in value within a range of approximately US $6,000 - $10,000 over the first 5 years.
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My favorite automobile of all time is the Ford Mustang. New or old, it doesn't matter to me , I love that car. For the purpose of this discussion let's research what needs to take place in order for the purchase of my dream car to be a profitable investment.
It takes 30-40 years for a car to move from the 'used' category to the 'classic' category. Purchasing a car near to that 30 year time frame may also be an option.
Buying the car correctly is critical from an investment perspective. When purchasing a car with that many years on it, there are so many things that may be broken or repaired unprofessionally. If your personal knowledge of automobiles is limited, you may want to make an investment in some professional advice in regards to assessing the condition of the car. This will help you gauge how much more of an investment will have to be made to restore the car to where it can be sold for a profit.
The rule of thumb for the average car restoration of an automobile 30 or more years old is $50,000. It is quite possible to spend as much as $100,000 if you desire things like a walnut dashboard or an interior lined with mink fur. At this point, it will be extremely helpful to assess if your investment will generate a profit, and also if you are able to do some or most of the restoration work yourself.
1967 Mustang Fastback GT S Code 390 Factory
You can easily spend $100K making a perfect 1967 Mustang. It's practically impossible to sell a '67 Mustang for $100K unless it's a Shelby or GT 390. Buying a Classic Car already restored may be a better option for those without the skills to restore the car themselves.
Given the cost of restoring a car versus buying a newer model like a 2015, or '16 can weigh in heavily at this point of the strategic planning involved in making a profitable investment in a Classic Car. If you plan on driving your car, newer models have better brakes, air bags, and improved fuel efficiency.
It will help if you don't plan on driving the car very much. This will lower the likelihood of things breaking and needing additional repair and with newer models, it will assist you in maintaining low mileage. Low mileage is a definite plus for resellers.
Now it's time to see how much meat there is on the bone when buying Classic Cars as an investment. I went right to eBay to see what levels these cars were trading for. I found offers for 1967 Ford 'Mustangs' ranging from $8,000 - $280,000.
Tax liabilities also need to be considered. When restoring a Classic Car, you need to keep meticulous records of everything involved in the restoration. If you are restoring the vehicle yourself you may want to become a legitimate business entity, so you can legally bill for your time and labor. Laws regarding taxes on the sale and purchase of Classic Cars vary from state to state in the USA and other parts of the world. It will be prudent for one to seek professional guidance regarding the taxes involved with your unique transaction.
If you can take the $8,000 Mustang and transform it into one worth $289,000, that idea has definite possibilities. Even the $90,000 trade has rewarding possibilities. I'm not sure what's under the hood of these very expensive models.
One thing for sure is that buying a classic car as an investment revolves around your love and desire for that particular automobile. It also is dependent upon your access to skilled restorers, if you're not able to do any part of the restoration yourself. It is most definitely a purchase with emotion attached to it, with the hope that there are others that can attach more emotion and money to the value of your Classic Car.