We regularly hear a single rare car sold in an auction for millions of dollars. And this notion of finding these unique automobiles at bargain prices and selling for a huge profit may enter our minds. At the end of the day, if we could hit big with one of them all our efforts will be worth it. But do people really make big profits on investing in collectors automobiles?
According to experts, large numbers of enthusiasts lose money in these transactions. There are a few reasons for this. Some of them are that people get sentimental, look at what they like, fail to buy the right auto and restore it properly. The bottom line is that you need specialist knowledge or spend a lot of time to find out about these automobiles and how to make money from them. Here are some of the points to keep in mind if you are considering being a classic car investor.
- Don’t Throw Good Money After Bad
Buying the wrong vehicle is only one of the problems that cause people lose money. When you realize that you bit more than you can chew you shouldn’t get sentimental or stubborn. It may be that there is no market for it or the restorations are too expensive or near impossible. When you realize you made a mistake you should try to get out of it with minimum loss. This rule actually applies to every types of ventures.
- Always Go Through a Thorough Inspection
You should question why someone is selling a beauty especially if it appears to be cheap. The sellers are not stupid and they know a lot more about the history of the vehicle than you do. There may be serious accident damages or almost burnt out engine. Before you purchase the vehicle you should have an expert check-up to make sure you don’t buy someone else’s trouble.
- Don’t Buy It On a Hunch
It may seem to be a great deal and you are getting a car that is in excellent condition. So, you take a hunch and invest in it. Do you know that there is a market for it? Only few classic cars can stand the test of times and those are the ones that were built well. If you buy something that was not popular even at their time there is a high chance they will not be popular now.
- Don’t Expect Quick Bucks
In most investments in life you need to wait for the right time. If you are hoping for quick returns you should consider something else. You should make sure that you don’t put down the rent and only risk what you can afford to lose. Remember you have to live until you can sell the auto at profit.
- Do the Math Well
You need to be smart to make money in any investment and do the calculations. When you look at other people’s transactions you may think that they are killing it. They buy for $5,000 and sell it for $25,000 and it looks like 5 times returns. But it may have taken them years to achieve that kind of return and they may have spent more than they made over the years. When you factor in inflation and alternative returns you may realize that it is not really a great return overall.
- Be Prepared to Do Some Work
Buying older cars is like buying a rundown property. They usually come with quite a few problems. You need to be prepared to do some work. Also remember that they usually require specialist work that cost more than getting a typical car repaired. Can you do some of the work? Do you know mechanics and body shops that can carry out the work at reasonable prices?
- Differentiate between Investment and Pleasure
Many collectors are enthusiasts who love these beautiful automobiles as well. If you are one of those people, you may quickly spend large sums to bring them up to your liking. At the end, you may end up enjoying driving them for a few years and that may be all you get out of them. When it comes to selling it you may realize that you won’t be able to recoup the money let alone earn a profit.
- Markets Move Up and Down
Like any other markets vintage car values go up in good times and go down in bad. So, you should think carefully about selling when you get a good offer. Thinking that you have a rare piece and prices can only go up may be a mistake. It takes a while for the market to come back once they are down and you need to hold onto to them in that period. Good investors are generally very successful in knowing when to hold and when to fold.
- Lack of Returns on Investment
When you buy a property you may be able to rent it and get a good return from it. Often these returns are the reason why people buy them in the first place. And you wouldn’t have the pressure to sell it when it is nicely making money for you. The only return you may get out of it is the pleasure of driving them occasionally. However, many owners report that they get stressed about having an accident that causes the car lose its value. In the meantime you will have to pay for insurance, storage, registration and tax. Therefore, few thousand dollars you made on it may not really be as good as you think it is.
10. Never Neglect Insurance
The moment you pay the price it is your responsibility. So, you need to make sure that they are insured properly. It is a bit trickier to arrange coverage for them than a typical automobile. You should be aware of the intricacies of classic car insurance. You need to decide if they would be driven at all and where they would be kept most of the time. Make sure that a policy covers them while they are being transported, worked on in a body shop or being driven. Also, you should insure them on “agreed valuation” bases.
11. You Should Be Able to Handle the Stress
You may have pulled off for once and got yourself a brilliant classic that is always going to be in high demand. This could be a real problem for some people. Can you handle the pressures of owning a really valuable piece and deal with possible risks of theft, fire and loss of value?
Once a guy in New York bought a painting because he liked it a lot and the price wasn’t worth mentioning. He hanged it on his wall in his apartment and enjoyed seeing it there every day. One of those days, a paintings expert was in his apartment and recognised its painter. He turned to the owner and informed him that it is currently worth about $4 million with a big smile. However, the owner wasn’t smiling. The problem was that he was rather fond of it now. The news meant that he could not keep it (or keep it in his ordinary apartment) after knowing how valuable it is. It was too stressful to have it and too expensive to keep for his own pleasure.
There will always be people making money from any kind of venture and people losing out. You should think about the above points and decide if you have what it takes.