Updated: Oct 13, 2020
Many people getting into cars, mainly classic cars nowadays, are focused on one thing, making money. Whether it's a quick flip or an investment, these people could lose a lot of money easily. We have all seen the car shows on TV where they buy a car, fix it up and sell for a profit. They make it look so easy. So easy in fact that people think they can do it themselves and more often than not, fall short. Trading cars is like trading stocks. You need to be on top of your game to make decent returns and have a lot of knowledge built up over the years. Overnight success is just a dream in both industries.
The truth is that most cars aren't an investment. Recently people see old cars and think it's an investment. Unfortunately for them, there's a lot more to it than that. Like stocks, car prices fluctuant, and no one knows for sure what's going to happen. Cars are even harder to predict than stocks as cars built by the same manufacturer in the same year, based around the same concept vary in price drastically. Knowing which car to buy, in the correct condition, in the right colour with the right options is extremely challenging. Grouping all old cars together as 'Investments' isn't correct. You need a vast amount of knowledge to make decent money. Many car shops open and close within a few years because people underestimate the challenges.
There's more to it as well. Unlike stocks, cars take up space. If you don't have space then you need to pay for storage. Cars also need maintenance which can get pricey. General services could be tricky and prices for old car parts are ridiculous. Don't forget about paying and renewing the license for cars as well. not only does this cost money but its also a huge inconvenience as it could take you hours. If the car doesn't have papers then its even more expensive to get it registered and will take up so much time that sometimes it's not even worth it. All this eats into your return on investment. Many people also want to enjoy their car, that's the main reason why they buy it. However, this means there's a chance someone will crash into you. Seeing how people drive, this is a big possibility. Worst-case scenario, your car could get stolen and be careful with the insurance as many won't pay for the full value of the car as many cars are worth more than book value.
Instead of looking at cars as investments, rather view them as a low-risk pleasure. They are something you can enjoy, experience, and reminisce about the good old days. when you have had enough, you could get most of your money back. if you make a profit then it's just a bonus. if you view it like that, you will also enjoy the car more as you won't be as worried about it. What's the point in owning your dream car but you never see it or drive it? If you do it for a return on investment, you will also never be satisfied with the car or how much money you will make.
However, some cars can be an investment but this depends on certain things. such as styling, rarity, and historical significance. tastes change and cars can become more or less desirable over time so what might seem like a future classic now can change over years. investment cars though are generally higher-end cars which need a lot of money to get into. Insurance and maintenance could be huge on these cars and it's a high-risk investment. People might say that a car that was $1 million new and 2 years later it's worth $1.5 million so that's a good investment. It is a good investment but there was a lot of risk and a lot of money spent over the two years. Also, would your $1 million do better if you invest it in something else?
In the end though, cars are meant to be driven and enjoyed. Yes, some cars have shot up in value and some people have gotten lucky but there are way better investment options which are lower risk and have a better return. If you are looking to invest, forget about cars and let us car guys enjoy them, the way they are meant to be enjoyed.