Lovers of beautiful rims and shiny bodies see classic cars and collector vehicles as jewels to be preserved. But if more and more private individuals are looking at the classic car market, it is because investing in a classic car has arguments and a potential for significant added value! How to find the rare pearl? Should I invest in a youngtimer or in a pre-war car? What are the current prices? In which car should I invest in 2021 and 2022?
Which classic car to invest in ?
Investing in the classic car market will, not surprisingly, require a good knowledge of the field, especially with regard to the different categories:
- Pre-war cars: vintage vehicles produced before 1950.
- Rare cars: not necessarily old cars, provided that their production was very limited.
- Youngtimers: vehicles whose production has stopped for at least 15 years, but which have not yet reached 30 years of age.
Which cars will increase in value?
Typically, the cars that will become collectible, such as the youngtimers, present the best advantages for the investors: not yet legally considered as collectible, they are therefore logically more affordable. Their owner will also have the quasi-certainty to make a nice capital gain at resale, provided that he takes care of his property, it goes without saying.
Every year, new models of vehicles obtain their collector’s car license and enter the category of assets present in a patrimony. In 2020, it was the models born in 1990 that will be able to benefit from this new status: it is indeed necessary to wait three decades before a vehicle is considered a collector’s item.
In 2020, the following cars entered the 30+ year old market:
- The Alfa Romeo Spider: an average value of €20,000 for the fourth generation of the Duetto.
- The BMW 850i: in 1990, this 300 HP V12 combined power and luxury. Unfortunately, it is plagued by high maintenance costs and is priced at around €22,000.
- The Fiat Tempra : a mix of Fiat Tipo and Lancia Dedra, this model is very rare on the market and could well become a masterpiece of a collection.
- Lexus LS 400 : the V8 gasoline sedan is becoming rare these days… a future must-have collector’s item?
- Mazda MX-5 : Civility and reliability have made this Japanese car a must-have. It costs about 7 000 € to buy one.
- The Opel Calibra : It’s hard to find a real production model because the car has been so much tuned! You’ll have to spend an average of €6,500.
- The Renault Clio: do we really need to present it? Quality of manufacture and driving comfort.
- The Toyota Previa: the European counterpart of the Estima, this minivan is recognizable by its rounded appearance.
Every year, collectors wonder which classic car to buy: in 2020, there were fewer choices than in 2021, since new vehicles enter the dance every year.
How to know the value of a car?
Investing in a classic car in 2021 and now in 2022 will require a knowledge of the market, of the auction system, but also of the value criteria of cars. Indeed, contrary to popular belief, the main criterion of a vehicle’s value is not its age or its antiquity, but rather its rarity.
The rarer a model is, the higher its value will be: investors prefer vehicles with the fewest examples produced (the best known examples are the six existing Bugatti Royales and the Aston Martin Valhalla, expected on the market in 2021).
The condition of the vehicle also influences the price of the property: a classic car in poor condition or that has been used too much will have a lower price than the same model with low mileage, for example. Finally, if you manage to find a classic car with all its original parts, you’ve hit the jackpot!
The collector car market
It is estimated that the classic car market has grown by 362% in ten years. However, the rarity effect is being challenged by the ever increasing production of prestigious cars worldwide. In France, more than 800,000 individuals collect cars in 2021, and favor auctions to acquire the models of their dreams.
The 1970s brought their share of cult cars (Lamborghini Countach, Porsche 930…) and collectors are fond of these vintage cars, whose value can reach several million euros.
What will happen to classic cars in the future? Most of the time, their value will increase after each year, provided that it is properly maintained.
How to invest in a classic car?
Find the right car for you
Which classic car to buy in 2021 and now 2022? What car should you invest in in 2018? The years and questions come and go for investors.
As we’ve seen before, the Fédération Internationale des Véhicules Anciens (FIVA) considers a car to be a collector car when it blows out its thirtieth candle. It will also have to have stopped production, but there is no deadline on this subject.
For investors looking for optimal return, the choice of a youngtimer, more affordable and therefore potentially more profitable, goes without saying. Generally speaking, market prices are rising rapidly, with a very low risk of loss, but also a very real risk of finding oneself faced with an unattractive capital gain.
This is why it is important to keep in mind that investing in classic cars is first and foremost a passion, just like investing in wine, the pleasure of building up an estate in an area that is dear to us is sometimes more important than the desire to realize a simple financial gain!
Of course, finding a Mercedes-Benz 300 SL or a classic car from the 80’s will not require a visit to the local car dealer. Investors and collectors can turn to specialized garages, but the prices charged can discourage many. Otherwise, go to an auction! The prices are unbeatable and you can be sure of getting a good deal… and talking to people who are passionate about their work.
What is the budget to invest?
Like any successful investment, the objective is to buy at a fair price in order to realize a significant capital gain upon resale. As far as classic cars are concerned, it is quite possible to buy a vehicle for less than €20,000. Of course, the prices go up according to the rarity of the car, but also its age.
In fact, the purchase of the car itself might not be your main expense: in order to ensure an excellent appreciation in value in the years to come, it will be essential to maintain it. Thus, investing in a classic car also brings its share of additional expenses:
- Maintenance costs of the vehicle,
- Costs of maintenance of the vehicle,
- Obligation to take out insurance even if the vehicle is not used,
- Garage or covered storage space…
In order to make the best investment in a classic car, it is recommended to get information on the ratings: many specialized websites offer advice and guides to make the best investment in this field. For example, vintage sports cars are about to see their ratings rise, while their prices are, for the time being, far from stellar.
Beware of pre-war vehicles
Maintenance, upkeep and fuel consumption can quickly become too heavy a burden…
Advantages and disadvantages of an investment in a classic car
Leaving aside the emotional and passionate aspect of a classic car collection, the main arguments for an investment of this kind are the constitution of a transmissible patrimony, and the realization of a financial capital gain at resale.
On this subject, this capital gain may be taxable if it exceeds 5 000 €. If this is the case, investors can choose to pay a flat tax corresponding to 6% of the amount generated by the sale of the vehicle in parallel with the 0.5% tax for the CRDS.
Another option for an investor is the general regime of capital gains tax on resale, which allows for a reduction of this tax if the vehicle has been held for a long time. Provided that you have proof of purchase and sale of the property, the capital gain realized will be taxed at 34.5% of its amount, but a abatement of 5% per year of ownership is applied.
Have you owned your classic car for 22 years? If you sell it, you will be totally exempted from the tax on the capital gain realized.
To end on a less positive note, it is important to remember that investing in a classic car requires time, money and space. It is more than recommended to think twice before getting into this field if you are only looking to make a profit.