Mention classic car investing to many people and you might be met with an incredulous, “Isn't a car a bad investment?”
The answer is yes, mass-produced cars are almost always depreciating assets and are therefore bad investments.
However, the opposite is true for classics, especially those that experience an uptick in demand. Those can be an excellent investment, and historical data bears this out.
In fact, many indexes that track vintage cars and their values have significantly outperformed the stock market over the past fifty years! In the most recent ten years - despite a mild recent correction - classic cars are still dramatically ahead of the stock market. Let's look at the HAGI Top Index, the overall market index maintained by the Historic Automobile Group - and how it has performed relative to other investments over the past decade.
The issue here is what we call the "price of admission". Investing in a broad stock market index with near-perfect diversification can easily be done for less than $100. There are hundreds of ETF (exchange traded fund) investing products that will get you broad, diversified exposure to the market or index of your choosing with almost zero ongoing costs.
On the other hand, assembling a properly-diversified classic car portfolio takes a staggering amount of research and initial capital, as well as significant ongoing maintenance, storage, insurance, and other costs. A portfolio of classic cars that is diversified comparably to our ETF example would require anywhere from $10M - $100M in initial capital and ongoing expenses (carrying costs) in excess of 1% annually.
(The differences in liquidity are also staggering - but we'll save that for another post.)
Several companies (including us) are working to eliminate that enormous cost of admission. Our platform lets asset owners offer shares in their assets that represent a piece of a minority ownership stake. Casual investors can get exposure to this very lucrative asset class – and diversify as broadly as they wish – without an enormous capital outlay or the ongoing expense and headaches. Asset owners get the benefits of distributed risk, access to liquidity, and they maintain majority ownership, custody, and control.
We expect our first classic car offering later this year.
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[Photo: Nastya Dulhiier via Unsplash.]