Coveted by enthusiasts and investors alike, classic cars combine aesthetic appeal with the potential to generate returns. While appreciating their beauty or enjoying the experience of driving one requires little more than an interest in automobiles, investing in classic cars takes knowledge, research, and substantial financial resources.
In this article, we’ll examine classic cars as an investment asset. We’ll explore:
- The reasons to invest in classic cars
- The factors that affect their value
- The risk inherent in this type of investment
Why Invest in Classic Cars?
Classic cars are a tangible collectible asset you can use to diversify your investment portfolio. Alternative assets don’t exhibit a high correlation with traditional assets and may perform differently under the same conditions. This can protect your portfolio against traditional market downturns.
Classic cars also have appreciation potential. Regular cars’ value drops rapidly after you purchase them, but the combination of rarity, desirability, and other factors can cause a classic car’s value to grow over time.
For many investors, the value of a classic car goes beyond the financial aspect. They invest in these vehicles because they like owning a piece of automotive history they can drive, or may even enjoy restoring them.
What Determines a Classic Car’s Value?
The factors that can affect how valuable a classic car is include:
- Rarity and production numbers
- Historical significance
- Originality
- Condition and restoration quality
- Mileage and maintenance history
- Provenance and documentation
Rarity and Production Numbers
When paired with strong desirability, rarity is one of the key factors that affects your classic car’s value. If a car is in demand and few vehicles are available on the market, you can expect to pay higher prices as a buyer or command higher prices as a seller.
Cars become rare either as one of the few survivors of a model with strong production numbers or as part of a limited-series production. Seasoned enthusiasts, however, can also appreciate the rarity of certain components in the car, such as a trim, an engine, or other factory options that were only available for a limited number of cars.
Historical Significance
A classic car’s historical significance is typically determined by its involvement in historical or culturally significant events, or by the innovation the car brought to the motoring world.
Cars that introduced new design features or philosophies or sparked new trends in people’s relationship with cars are often seen as historic. A car with historical significance might be in higher demand by car enthusiasts, which in turn increases its value.
Examples of models that achieved historical significance include:
- Lamborghini Countach, an early supercar iconic for its wedge shape and scissor doors
- Duesenberg Model J, an early luxury car that became iconic for its design and engineering
- DMC DeLorean, which earned its historic status through its appearance in the Back to the Future film franchise
Originality
A classic car’s originality depends on how closely it matches the factory specifications at the time it was created. This refers to determining whether it retains all or most of its original parts, regardless of their condition. A car with high originality will typically be more valuable than a car with multiple modifications.
Condition and Restoration Quality
Like regular cars, a classic car in better condition will be more valuable than the same car in worse condition. The industry uses the following rating system to determine the condition of classic cars:
| Rating | Description |
| Condition #1 (Concours) | A car in perfect condition, better than when it was brand new |
| Condition #2 (Excellent) | A car in almost brand-new condition, barely distinguishable from Condition #1 |
| Condition #3 (Good) | A car exhibits minor signs of aging and flaws on close inspection |
| Condition #4 (Fair) | A car shows easily identifiable flaws from a distance |
| Condition #5 (Project Car) | A car that needs serious restoration work, but is salvageable |
| Condition #6 (Parts) | A car whose restoration would be cost-prohibitive |
Restoration can improve a car’s rating. The highest-quality restoration will also aim to preserve as much originality as possible, and while expensive, the process will increase the vehicle’s value.
Mileage and Maintenance History
Driving a classic car can help maintain it in a working condition. A car that hasn’t been driven for a long time can suffer from various issues, such as:
- Seals and gaskets drying out, creating potential leak points
- Oil settling, reducing its ability to protect engine components
- Battery draining and eventually losing its ability to hold a charge
On the other hand, driving a classic car too much and too often can cause regular wear and tear, which may also reduce the car’s value. It can also complicate car insurance, as insurance companies typically impose annual mileage restrictions on a classic car to maintain eligibility.
Driving it up to 3,500 miles per year should help preserve the car’s function while minimizing the risks of operational damage. Regular maintenance can also help keep the car in good condition and help preserve its value.
Provenance and Documentation
Provenance refers to the history of a classic car, and it can include documents that show:
- Original factory specifications and parts
- Proven ownership history
- List of activities or events the car has been part of
- History of maintenance and restoration
Provenance increases the car’s value by reducing the buyer’s risk. It removes the uncertainty about paying a significant amount for a car based on little more than the seller’s claims.
Risks of Classic Car Investing
Investing in classic cars carries risks you should factor into your decision to add them to your portfolio.
A major risk investors often bring up is the total cost of investment. Since the top segment of the market tends to perform better even at times of economic turmoil, it would be prudent to invest in a more expensive classic car. You also need to consider additional ongoing expenses, such as insurance, maintenance, and storage costs, all of which can add up quickly and reduce the net returns from your car’s appreciation.
For this reason, classic car investors are often advised to purchase a vehicle they love, so at the very least they can get emotional fulfilment out of it, if not a financial one.
Additional risks and downsides of investing in classic cars include:
- Low liquidity: Classic cars are an illiquid asset. You usually won’t be able to sell them quickly at a fair market price
- Need for specialised labour: Even routine maintenance on a classic car might require you to track down specialists familiar with the vintage automotive systems
- No income generation: Unless you rent out your classic car, which can expose it to damage and theft, you will not be able to generate returns from it until you sell it at a profit
If you choose to drive your classic car, you also expose yourself to a different kind of risk. Cars that were created before modern car safety systems and features typically perform worse in case of accidents: a modern car built in 2012 has a 56% lower fatality rate than a car people would drive in the late 1950s.
How To Invest in Classic Cars
After deciding to add a classic car to your investment portfolio, you should learn about:
- Investment methods
- Purchase channels
- Investment strategies
Investment Methods
The most common way of investing in classic cars is direct ownership: you purchase the whole car, take physical ownership of it, and arrange for storage, maintenance, and eventual sale.
If you want market exposure without the high initial investment or holding costs, you can opt for fractional ownership instead. This type of investment allows you to acquire a partial interest in a car through an investment structure such as a limited liability company that owns the vehicle.
With fractional ownership, the platform or company that manages the investment is in charge of storing, insuring, and maintaining the car. The associated costs might be passed on to investors as fees.
Purchase Channels
Online marketplaces such as Hemmings and Hagerty let you access a wide pool of listings, compare prices and car specifications, and take part in online auctions or purchase the car directly from the seller. However, you are still responsible for conducting a physical inspection of the car and examining the vehicle’s history.
You can also attend auctions in person. Popular auction houses include Mecum Auctions and RM Sotheby’s, and they can offer you access to rare models that would be difficult to find elsewhere. Auction houses typically charge buyers a premium, in addition to charging sellers a fee, and the competitive nature of bidding can drive the prices up.
Specialised classic car dealers might add a significant markup to the price of the cars they sell, but they can also assist with valuation, vehicle inspections, and documentation. This puts them in contrast with private sales, which may allow you to negotiate a lower price, but will also require you to conduct the due diligence on your own.
Investment Strategies
A classic car investment strategy should balance the ongoing costs of owning a classic car with the potential to generate returns. Buying a car and holding it for a long time might allow for a higher appreciation, but it will also incur higher holding costs.
Purchasing a classic car to quickly sell it reduces ownership costs, but requires significant market expertise. However, according to data from Hagerty, this isn’t the preferred classic car investment strategy: in 2024, slightly more than 2% of classic car sales happened within a year of purchase.
Novice investors might find it challenging to purchase a car with a lower condition rating, restore it, and sell it at a profit. This investment strategy requires a thorough understanding of the model, restoration costs, and market movements, and can be challenging even for experienced investors.
Beyond Classic Cars: Diversifying Your Wealth Internationally
Classic cars and other alternative assets such as art, wine, or whiskey can help you introduce some variety into your portfolio beyond what’s offered on traditional markets. And while that kind of alternative investment strategy has its place in portfolio diversification, it could also be complemented by geographic diversification.
Investing in assets located abroad can provide many benefits, including:
- Exposure to frontier markets experiencing rapid growth
- Protection of assets against aggressive taxation policies
- Protection against market instability at home
An added benefit of investing in assets abroad is that some might open a pathway to residency or even citizenship in another country. Depending on your choice of jurisdiction, you may be able to reduce your tax liabilities, store your tangible assets abroad, plan for a retirement in a country with lower costs of living, or create a plan B in case the circumstances in your home country deteriorate.
Choosing a suitable tax-friendly jurisdiction and obtaining residence there can be a complex process, as it requires a practical knowledge of tax and immigration regulations in both countries. For that reason, it’s best to plan the relocation with the assistance of experienced professionals, such as Nomad Capitalist.
Protect and Diversify Your Wealth With Nomad Capitalist
Nomad Capitalist is an advisory firm that specialises in asset protection and global mobility. More than 1,500 clients have relied on our services to secure a second residency, optimise their tax exposure, access international banking, and identify investment opportunities abroad.
Our core service is the Action Plan, a blueprint for achieving your international mobility and wealth preservation goals. We build each Plan around our clients’ specific situation and needs, and we provide management support to ensure the Plan is properly implemented.
The process of partnering with Nomad Capitalist on an Action Plan is simple:
- We ask you to fill out a form to help us determine whether we’re a good match
- We schedule a 45-minute call to learn more about your circumstances and goals
- Your case manager develops an Action Plan and sends it to you for approval
- We implement the Plan over a 12-month period
- You continue receiving support from us even after the Plan is implemented
If you’re interested in diversifying your portfolio, we can help you find lucrative investment opportunities in tax-friendly countries. We can also assist you in exploring tax jurisdictions where you can obtain residency by investment, and provide assistance and guidance through the whole process. To get started on the road to your second residency, contact Nomad Capitalist right away!
