Are Classic Cars A Good Investment? How Experts Make Money with Classics
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UPDATED: Jul 5, 2021
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The historically low-interest rates have pushed investors to look for alternative ways to invest their money.
Classic cars have always been a popular investment vehicle.
Classic Car As An Investment
With investors looking to diversify their assets, classic cars might look like a guaranteed good investment.
The truth is, well, it is complicated.
Illustrated above is a GMC series 100 blue-chip classic truck. Classic trucks in this condition can sell for $25,000. Buyers are willing to pay substantially more for blue-chip trucks since they can be an excellent investment. Image credit: Classic-Trader.com
Classic car auction activity has leveled off in recent years.
The uncertainty of the recent economic issues has created a lull in short-term classic car sales, particularly for blue-chip classic cars and American muscle cars.
Affordable classics continue to enjoy steady price appreciation.
Don’t let the recent decline in sales activity scare you into not buying a classic car.
Like other investment markets, classic cars are not immune to fluctuation, according to Investopedia.
That means classic car prices could surge in the coming years.
It also means that there are some great buying opportunities now.
As they say, buy low, sell high.
Not every low-priced classic car is a great investment opportunity, though.
If you like to restore vehicles, classics can be a great investment. The 1967 Corvette illustrated above was a “barn find.” Then restored to sell and make a profit. Montana Danford at Barnfinds.com restored 3 vehicles to sell at $160,000.
That means you shouldn’t just dump your money into the first classic car you see.
Like any investment, it is wise to do a little research before buying a classic car.
As you read this article, you will learn more about the factors you should consider to make sure your classic car purchase is a good investment.
These factors include:
- How long you plan to own the car
- The type of classic car
- The make and model of the classic car
- The scarcity or rareness of the car
- The age of the car
- The intrigue of the car
- The demand for the car
- Classic car insurance premiums, according to Benzinga
Long-Term vs. Short-Term Ownership
I’ll keep it simple.
If you’re looking for a quick flip short-term investment, a classic car is not the best choice.
Many live auctions have been canceled or moved to online platforms, and big-dollar investors are parking their money elsewhere for the time being.
However, the latest classic car market downturn trends point to a likely growth in investment activity in a few years.
That means that now is a great time to buy if you are willing to hold on to the car for a few years.
The current low prices and 5-year growth outlook makes classic cars a good long-term investment choice.
The Type of Classic Car You Plan to Buy
Classic cars are generally broken into four different investment categories:
- Blue Chip Classic Cars
- American Muscle Cars
- Affordable Classics
Blue Chip Classics, Ferraris, and American Muscle Cars have all seen price drops from their previous highs in the past two years.
Blue Chip Classic Cars
About 25 cars make up the list of Blue Chip Classics.
Some of these cars include:
- 1966 Shelby Cobra 427
- 1959 Maserati 5000GT Frua
- 1965 Aston Martin DB5
- 1967 Chevrolet Corvette
- Et al
Despite the recent price drops, these cars still cost north of $2 million on average.
However, if you invested in one of these cars just ten years ago, you would have more than doubled your investment.
If you can weather the current market storm and buy for the long term, Blue Chip Classic Cars are a good long-term investment.
Like Blue Chip Cars, Ferraris have a high cost of entry.
Although prices are down more than 15% from their record high average price, you can still expect to pay shy of $5 million to buy a high-end classic Ferrari.
While the entry barrier for high-end classic Ferraris is high, the return on investment potential is huge.
A 1986 Ferrari Testarossa, a blue-chip classic. Only 41 Ferraris were painted in this color. Making it an excellent opportunity for an investment.
If you bought a high-end Ferrari classic ten years ago, you would have quintupled your money!
Although prices will continue to fall in the short term, the potential for incredible returns making Ferraris an alluring long-term investment.
Don’t expect to make money with a quick Ferrari flip, though.
American Muscle Cars
Like high-end Ferraris and Blue Chip Classics, American Muscle Cars haven’t performed very well in the last two years.
Resale values have fallen nearly twenty percent off their record high prices.
Unlike the Ferrari and Blue Chip categories, American Muscle Cars haven’t experienced great growth in the last ten years.
That makes American Muscle Cars a poor investment in both the short- and long-term.
However, if you’re in the market to spend more than $200,000 for an American Muscle Car, you’re probably looking to buy one for the unmatched fun drive experience and the beautiful, aggressive appearance.
Below are Muscle Car’s which are doing fairly well in the classic market:
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While you probably won’t get the best financial return on your investment, you won’t lose much money.
You’ll also get to enjoy driving a beast of a vehicle as long as you keep it in good shape.
The Affordable Classics category is the only one to see a continuous increase in value over the past ten years.
These cars, including the 1971 Datsun 240Z, the 1967 Volkswagen Beetle, and the 1962 Studebaker Lark Regal, have a much lower entry price.
Most of these cars, except the Datsun, can be bought for less than $40,000.
Before Nissan, the company was Datsun. Illustrated above is a 1970 Datsun 240Z. If you look for Nissan or Datsun’s from the 1990s and back, you can find an excellent classic investment.
The classic cars in this category haven’t had the same return on investment growth as the high-dollar cars in the past ten years.
They have increased in value by about 67% in the past ten years, compared to the 200-500% growth of Ferraris and Blue Chip Classics.
They are still a good investment, especially for those looking for an entry-level classic car.
Now that we know classic cars still have good long-term investment potential, we’ll take a look at what makes a classic car worthy of investment.
The Make and Model of the Car
The make and model of a classic car can make all the difference when looking for a good investment.
Not every old car is considered a classic.
Not every classic car will increase in value at the same rate.
Before you drop money to invest in an older car, you should know exactly what the current market looks like for that car.
Traditionally, classic cars from Ferrari, Aston Martin, Mercedes Benz, and Shelby (AC) Cobra are excellent investment choices.
They are also at the top end of the price scale.
1960s Volkswagen Beetles can be an excellent investment. Many of them can be purchased for less than $3,500. You can restore it, then sell it for a nice profit. 1960s Beetles in excellent condition can sell for $50,000+
For those looking for entry-level classic cars, auction houses provide much great information on sale value and investment returns for specific car make and models.
The Datsun 240Z, Ford Mustang GT, Volkswagen Beetle, and Volkswagen Karmann Ghia are specific makes and models that have enjoyed consistent gains in the last decade.
Other Affordable Classics are worth a second look.
However, they may not be as strong investments as those mentioned.
The Scarcity of the Car
As in other alternative investment classes, the value of a classic car can be impacted by its overall scarcity.
The fewer still in existence, the greater the chance that a classic car enjoys a large appreciation value.
That doesn’t mean that a car with a limited run is guaranteed to be a great investment.
A good example of scarcity is the Honda S2000. The S2000 keeps increasing in value because of the scarcity of vehicles. According to Car and Driver, Honda even issued a statement that you can buy new parts from Honda.
If the car wasn’t trendy when it was originally released, there’s a good chance it won’t be highly sought after by other classic car investors.
Classic cars often define the year or decade during which they were manufactured and sold.
If nobody was interested in the car then, investors probably aren’t going to be interested in the car now.
Though, cars that were popular in their time will see a big jump in investment value now if there are few of them in existence.
The Age of the Car
Scarcity and age often go hand-in-hand.
The older a classic car is, the more likely it is that there are fewer in existence.
The influence that a car’s age has on its investment value isn’t all about scarcity, though.
In many classic cars, specific desirable features were only available in certain years.
That’s why you’ll see certain makes and models of a certain age (or production year) sell for more than the same make and model of a different year.
The Intrigue or Appeal of the Car
While a family sedan is resourceful and gets the job done, it isn’t exactly exciting.
That’s why family sedans rarely earn the classic car label.
They tend to depreciate and never increase in value beyond their original sale price.
The classic cars that are considered good investments are those that are exciting and desirable.
The original 1965 Ford Mustang Shelby GT350 is considered a premium classic muscle car. Depending on the condition, a 1965 Shelby GT350 goes from $90,000 to $500,000. Image credit: Classiccars.com. Below are values and estimate based on condition:
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They are the “head-turners”; car models that reach celebrity status thanks to a film appearance or celebrity endorsement.
Whether it’s the sleek design and speed of the 1966 Shelby Cobra 427 and the 1966 Ferrari 330 GT SII or the unforgettable fun, generation-defining look of the 1967 Volkswagen Beetle, a classic car’s success is defined by its appeal, both then and now.
The Demand of the Car
A car could be scarce and have an unforgettable, desirable design and still be a lousy investment.
Like all markets, if there is no demand, there is no investment value.
Before committing to buy a classic car as an investment, it is worth researching past sales.
If you can’t find any recent sales despite there being a glut of that car on the market, there is a good chance that the car’s demand has declined.
Pay attention to trends on the auction market to get an idea if the classic car you want to buy has investment potential.
If a car’s value has fallen a good amount from its previous high, and there are a bunch for sale in your region, you’re not going to get a good deal if you buy it.
That is often considered “catching a falling knife” in investment circles.
Are you looking for the next great classic car investment?
Part of the fun in investing in classic cars is finding the next great investment; cars that are (relatively) affordable now but have the potential to see a huge spike in value.
The following cars are gaining traction among investors as being the next hot ticket investment vehicle.
- 1990 – 1998 Lamborghini Diablo
- 1984 – 1993 Mercedes-Benz 190
- 1998 Porsche 911 Turbo S
- 1994 Mazda RX-7
- 1973 Datsun 510
- 1983 DeLorean DMC-12
Although most Blue Chip Classic Cars and Ferraris require a significant up-front investment, you don’t have to be a millionaire or billionaire to enjoy investing in classic cars.
If you do your research ahead of time, classic cars can be a good (and quite fun) investment.
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