Passion investing drives interest in classic cars but maintaining value requires diligence

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It’s vintage cars and coffee season; and after being inspired at these fall auto shows, a client may decide to purchase their dream antique vehicle. But does it make sense financially?

Classic cars – vehicles classified as 25 years or older – are the second-highest passion investment for high-net-worth (HNW) individuals globally after art, growing by 25 per cent in value in 2022 from the previous year, according to the Knight Frank Luxury Investment Index. Data firm Statista estimates the classic car industry has grown to US$31.6-billion in revenue worldwide.

Zael Miransky, certified financial planner at MCO Wealth Management Inc. in Toronto, has some HNW clients who saved enough for retirement and want to spend some of their surplus funds on a classic car.

Mr. Miransky, a car enthusiast himself, understands the lure and says the decision to buy is rarely about finances. He says childhood nostalgia fuels much of the excitement for classic cars. One of his clients inherited a classic Jaguar from his father. The client initially wanted to sell the Jag but is now glad it’s in the family. Beyond owning a showstopping vehicle, it’s a living memory of his dad and times from the past.

“There’s a much stronger emotional component with owning a classic car versus owning a stock or bond that’s out of sight, out of mind in an account,” Mr. Miransky explains. “You can walk into your garage and take enjoyment out of seeing that car.”

One issue is determining whether a client is a car enthusiast or a collector. Put another way, do they simply want to enjoy and drive the vehicle, or do they hope to make a return by investing in an antique vehicle?

Mr. Miransky finds most would-be owners he encounters are firmly in the enthusiast category. He notes that cars from the 1980s are now popular as those are the ones from millennials’ childhoods.

“Ultimately, the decision comes down to how much wealth one has accumulated and how much they can devote to their wants versus their needs,” he says.

Maintenance and storage

For those who want to collect some cars eventually and make money from them, a park-it-and-forget-it approach won’t work, says Harry Sale, financial advisor at Raymond James Ltd. in Toronto, who owns three vintage race cars with his father. In fact, clients consult with him often on this subject.

“Buying a classic car is not like a piece of art you’re hanging on the wall to maintain its value,” he says. “It must be looked after.”

That means regular maintenance by a mechanic experienced in working on antique cars, which is not easy to find. Today’s internal combustion engines and electronic vehicles contain a high amount of electronics and chip technology. Mechanics rely on a computer to assist them with troubleshooting. Many may not even know how to work on, say, carburetors and chokes common in antique vehicles.

In Canada, owning a classic car also means qualifying for specialized insurance and storing the vehicle in a temperature and humidity-controlled garage. Mr. Sale notes that many owners will find professional car storage, which can run a client hundreds of dollars a month.

If a client plans to restore the car, he notes it often costs more than expected, which is why Mr. Sale says not to expect bargain barn finds to turn into significant investment gems. He uses the example of a classic car with rusty parts.

“How are you going to find replacement parts that are not only exactly to the specifications you need but also the paint colour, make and model to the cost you are expecting?” he says. “It can be difficult to turn a profit because of how much work is required.”

Modifying a classic car

Some may want to take restoration further by designing a modified (mod) car, essentially a vintage auto body with all the modern features and gadgets available in later-model cars. A restoration of that nature can cost hundreds of thousands of dollars and rarely makes the money back, says Lewis Thaw, a car collector and owner of Canadian Classic Auto Supply in Delta, B.C., who is currently sourcing and working on six mods.

When sourcing a classic car, Mr. Thaw says paperwork and examining the car’s original parts are musts. Ideally, the vehicle would have no rust.

“Make sure the vehicle is licenced, insured and registered to the person you’re buying it from and check that the VIN number matches the paperwork you’re being handed,” he says.

Sometimes, a lifelong fantasy of owning a particular vehicle is just a dream, even when you can afford it.

Mr. Thaw met one enthusiast eyeing his personal 1965 Ford Mustang convertible. The prospect envisioned the car as the perfect ride for dinner dates with his spouse and the occasional Sunday cruise. But on a test drive, he was immediately uncomfortable with lap seatbelts, rigid steering and handling and lack of comforts such as air conditioning and cruise control.

The prospect decided to purchase a new Mustang instead.

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