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Buying a Classic Car – What You Get for Your Money

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If you’re looking for a great investment, try a no-load index fund. If you’re trying to talk yourself into believing that buying a classic car is a great investment, good luck with that. Be honest – it’s an expensive toy. That doesn’t mean you shouldn’t buy one…or four. It just means that you need to understand the cost of your hobby. Doing so will make the buying process less stressful and more enjoyable.

The Investment 
The first fallacy in cars as investment is appreciation. The top cars, north of half a million dollars, might wildly appreciate and might be good investments. If you’re in that market, please stop reading and do whatever you want to do – because you can. If you’re looking at collectible vehicles that are worth tens of thousands or even a hundred thousand dollars, prices have been stable for the last decade. Prices of collectibles are also more volatile than most investments. They tend to rise faster in bull markets, but crash (bad choice of words) more precipitously in down markets. Taken as part of a portfolio, cars simply add a little instability with almost no appreciation. This is just considering price trends and ignores the actual cost associated with buying a classic car.

The Buy
The first area of cost comes before the car is even purchased. If you’re new to this game, the chances are the person on the other side of a deal is not, and you may be facing information asymmetry. That’s not good. It is possible to research and value the vehicle dispassionately, but that can be difficult until you’ve actually gone through a number of transactions. If you over pay a few thousand per transaction, you’ve destroyed any hope of appreciation and have paid very expensive tuition for a car buying class. Make sure to do your research before anything else.

The Project
Restoration, if any, has to be planned before the buy. Unless you have significant mechanical knowledge and experience with classics, it may be best to get the help of an experienced classics mechanic. This probably won’t be the same guy who changed the oxygen sensor on your Corolla. Even if you intend to do most of the restoration yourself, paying for advice can help you understand what’s ahead of you. It can also establish a good relationship with a mechanic who may end up helping you with your car.

Your project philosophy also needs to be defined, as this will impact cost. A restoration philosophy seeks to put the vehicle back to the original condition to the greatest extent possible. A restomod philosophy essentially treats the sheet metal shell and possibly the interior as original and effectively builds a new machine underneath. If you are trying to use original parts, understanding the availability and how to hunt down the parts is critical in costing the project. That’s not to stay a restomod approach is cheaper. Typically money in these projects goes to speed and performance. Finally, in a restoration there will be things you can’t do, such as upholstery, painting, and engine rebuilds. Overall, when considering your project, budget accordingly for your plans and any possible extra costs.

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The Baby
Once the vehicle is complete, you have to protect it. The first level of protection is keeping it properly stored. A typical garage may be adequate, assuming that your son Cameron doesn’t send your Ferrari GT California Spyder flying into the woods after a day of epic hooky. If you collect multiple cars, you may need to rent space in a specialized storage facility. Rates will depend on the local real estate market but will likely be at least a couple of hundred dollars per month. With multiple vehicles, storage costs can add up quickly.

Insurance is the second level of protection. This cost works basically the same as a conventional insurance policy. While the total cost of insurance may be cheaper than your Corolla, it is not on a per mile basis. That’s because miles driven is a significant factor in insurance costs for classics. A car that is trailered from show to show has little risk. A recreational restomod that is routinely driven on the weekend will have higher risk and higher premiums.

The final major cost is maintenance. It’s possible to abuse your Corolla for hundreds of thousands of miles, using solar eclipses for your oil change frequency, and the thing will still run. Cars have advanced a great deal. So, while you may love the old Super Bee, be honest— it is not the most mechanically reliable machine every built. Classics, on a per mile basis, are not cheap to maintain. Parts can be hard to find. Mechanics who work on them are well-paid. Over the course of your ownership, it will add up.

The Joy
A classic car should be owned because it is a joy. The driver should be thrilled by the performance or enchanted by the history. It should fulfill a sense of curiosity about how a great piece of technology was designed and built. If you’re lucky, all of the costs may add to less than the price you sell it for someday. Even if you’re close to breaking even, you’ve had the fun of owning it and caring for it for a time before passing it on.

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