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Can cars ever be a good investment?

April 19, 2016

finance

 

If you start to add up the cost of car ownership, it rapidly starts to become very expensive  indeed.

Even if you use every trick at your disposal to make motoring affordable it still is never a cheap proposition. Also cars tend to depreciate in value rapidly, given this it might seem surprising that any numerate person would even consider buying a car as an investment.

For some investors, whether you consider them fortunate or skilful is up to you, classic cars have proved to be a successful way for them to diversify their portfolio. Could classic cars, like fine wines or art, be a sensible ‘alternative investment’?

During 2015 specific parts of the classic car market did see some healthy growth. In fact if you owned the right vintage models you could have seen a 20% increase in the value of your investment. To put that into context, that was twice the growth seen by gold in the same period.

Investing in classic cars is far from a trouble free business. Like any physical asset it needs to be  protected and maintained. This storage and maintenance carries with it an overhead. Neglect this and the condition of the asset will degrade, lowering its value.

It may be fine to leave a painting in a vault, but cars are machines designed and built to move. If you leave them to their own devices in even the nicest of air conditioned garages they will degrade over time. Part of maintaining a classic car in top condition is actually taking it out and using it every now and again.

The need to take classic cars out and drive them is just one of the reasons why this kind of investment is best left to the enthusiast. There is no guarantee at all that the value of a classic car will increase at all, so if you are wanting to invest in one it only really makes sense if it is one that you will enjoy running.

Of course there is a balance to be struck when it comes to maintenance and restoration. In general the better condition a classic car is in, the more valuable it will be, but in certain circumstances the most important thing is authenticity. For instance a rust-bucket mini from 1959 has been valued at £15,000 – it was thought to be just the eighth of the popular British cars ever to have been built.

If you are going to be driving a classic car on a regular basis then there is a question as to whether you should be modifying it in order to bring it up to modern standards of safety and reliability. If it is done carefully then it should be possible to revert to factory settings as long as the original parts are kept.

Have you invested in a classic car? Or maybe you’re thinking about it? Share your thoughts in the comments below.
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