People have been introduced to new possibilities in the past few years by television. Some of these possibilities include; flipping classic cars and flipping old homes. A lot of people are attracted to these activities since people love easy money. However, it is risky and difficult for inexperienced people to make money with these activities. In fact, some people begin with high hopes, but they end up losing money.
Doing your homework can help you avoid failure. It is better to understand the risks before putting your money on the line. You can make money with classic car investing. How? Here White’s Bodyworks share how to do it properly:
What Is Your Investment Strategy?
You need to know why you want to invest in classic cars. Do you want to buy an old car and drive it now, then sell it later for a profit? Do you want to buy a new car, which you think it may become a classic, and then sell for a huge profit in the future? Are you planning on buying cars that appeal to most car collectors in America? Or do you want to purchase an exotic car or a high-end car?
If you can answer these questions, you will know the type of car you need to buy and where you to find these cars. In addition, the answers can help you know the cost of purchasing the car and the potential profit you will make from selling your car.
What Makes a Car Collectible?
Do you know what makes a car collectible? One of the biggest parts of the collectability of a car is aesthetics. Appealing colors and classic cars with clean lines attract more attention at private sales or auctions. That is why it is easy to sell these cars.
Here are some of the things collector cars usually have:
- Ties to popular builder or designer
- A racing pedigree
- Some historical significance
- Past celebrity ownership who was a car enthusiast
These are the characteristics of a collectible car. This is because a lot of car collectors usually purchase cars that remind them of their youth. In short, car collectors prefer to purchase a car that they dream of owning when they were still young.
Know What to Avoid And the Things to Look For
If you want to buy a car that you plan to sell at auction or privately, you must know what to avoid and look for in a classic.
Experts encourage new classic car investors to avoid purchasing any car with signs of serious rust. You can restore a rusty car. However, it can cost more money to restore it. In short, you will spend more money restoring the car and you will not recover the money by selling the car.
Here are the things to look for in a collectible car:
- A car you would love to drive or own
- A unique or rare model – especially if there are a few models built in the same year
- A car with low mileage
You can make more money with a car with “matching numbers”. Do you know what this means? It means the cars share the same identifiers of the major components found in the VIN (Vehicle Identification Number). The rear axle, the transmission, and the engine are some of the parts sharing the same identifiers.
Verifying the last six digits of the Vehicle Identification Number is easy since they are stamped on the car engine. These identifiers are usually not found on the rear axle or transmission. However, the date codes are found on the rear axle or transmission. If you want to know if the major parts share the identifiers found in the VIN, then check the date codes of the major parts of the car.
Trends and Tastes Change
You will always find people who love muscle cars and those who love high-end sports cars from Europe. However, it is not a good idea to put your eggs in one basket.
For example, there was a huge demand for Ferraris in Japan in the 1980s because more Japanese were interested in Ferraris in the 1980s. However, once the Japanese were no longer interested in Ferraris, the prices of the Ferraris dropping quickly.
Another example is the Dodge Viper with 400 horsepower, which was built in the 1990s. A lot of investors were interested in this car because of its 400 horsepower and unique appearance. The investors thought the value of the car will appreciate. However, the value of the car did not appreciate. In fact, you only need not more than $40,000 to purchase an original Dodge Viper. The price is $10,000 less than a brand new Viper’s sticker price.
Expensive to Invest in a Classic Car
It is expensive to collect or invest in a classic car. This is because a classic car is legally classified as tangible personal property. Therefore, if you want to make a profit on your classic car, you will need to pay capital gains.
If the classic car is not in a good shape, you will pay the purchase price and the cost of restoring the car. For instance, it can cost over $1M to use exact recreations of parts or original parts to bring an old classic vehicle to mint condition.
In addition, you will have to spend more money on:
All fees associated with sales transactions