5 hidden costs of owning a classic car
Owning a classic car
Jay Leno's multimillion-dollar collection of some 200 cars includes a 1909 Baker Electric, a 1928 Bugatti Type 37A, and a 1926 Bentley Roadster with a twin-turbocharged 8-liter engine. But someone who owns only one classic car, whether it's a vintage Alfa Romeo or a 1965 Mustang, is just as passionate.
In the world of classic cars, the term doesn't have a precise meaning. Although the Classic Car Club of America defines a classic as a "fine or distinctive automobile, American or foreign built, produced between 1925 and 1948," it also can be a beautifully built race car from the 1960s.
"Basically a classic car is in the eye of the beholder more than anything else," says Jeffrey Vogel, a car collector in Bridgehampton, N.Y.
The biggest expense for a classic car is likely the acquisition cost, but here are some financial points you might want to think about when considering a classic car.
Don't buy just for an investment
Leno buys cars he loves, and that's a better strategy than looking at them as an investment, though he has seen many of his cars appreciate. In 1999, he bought a 1994 McLaren F1 race car for $800,000. In 2010, a similar car sold at auction for more than $4 million.
"It was a bonanza that we're never going to see again," Vogel says.
Today, "interesting" classic cars cost around seven figures, and "ordinary" cars are six figures. If you want to make money on the car you buy for $3 million, you'd better be sure you'll be able to find someone to pay you more when you want to sell. Keep track of results from Barrett-Jackson collector car auctions. NADAguides.com and the Kelley Blue Book also are popular and reputable resources.
Pay the right price
Price is determined by age, condition, original features and scarcity. When Nicolas Cage spent almost half a million dollars in 1997 for a Lamborghini Miura SVJ confiscated from the Shah of Iran's Imperial Garage, he must have really wanted the car: He paid about $200,000 more than market value at the time. To avoid making the same mistake, you can check the value of your car on websites for the National Automobile Dealers Association, Hemmings Motor News and Hagerty Insurance.
Before you write out the check, determine if you are buying a pristine car or a beater. Mark Hyman, owner of Hyman Ltd. Classic Cars dealer in St. Louis, urges a pre-purchase inspection. But make sure you go to someone who knows about the make and model you are buying. "A new Mercedes dealer may not know anything about a classic Mercedes," Hyman says.
The best way of finding someone to do this inspection is through word of mouth, through a classic car club in your region or a classic car dealer. Charges vary depending on the car, travel time, if any, and how long it takes to complete the inspection. For example, the National Auto Inspection Services offers a pre-purchase inspection for $220.
How much is classic car insurance?
Most collector cars are driven only occasionally and are carefully maintained, translating to lower insurance rates than the family sedan. That's especially true if you use an auto insurance company that only insures classic cars, such as Hagerty Insurance Agency LLC in Traverse City, Mich.
"We insure the fun car you don't have to have," says Hagerty spokesman Jonathan Klinger. The premium depends on the car's value. For example, a 1959 Austin Healey 3000 with a guaranteed value of $25,000 costs approximately $250 a year to insure, while a late 1950s Bentley Continental with a guaranteed value of $250,000 would cost $1,750 annually to insure. Just make sure the policy is for "guaranteed" or "agreed" value, meaning that in the event of a total loss, you're guaranteed to receive that amount. On the other hand, actual cash value is based on replacement cost less depreciation.
Can you afford to coddle your car?
When you buy a classic car, you can't just park it in your driveway. It's a fragile property and needs tender loving care. Comedian Jerry Seinfeld has a passion for Porsches and owns almost 50, of which the centerpiece is a $700,000 Porsche 959. Only 200 were built and never went through emissions and crash testing, so they cannot be driven on the street. Unwilling to trust this prize to any Manhattan garage, Seinfeld reportedly spent almost $1.5 million to have his own storage facility built in the city.
If you don't want to go to those lengths, storage facilities exist across the country. "The cost is partly a function of real estate," Hyman says. And the economy. In 2007, the Bridgehampton Motoring Club, which offers 24-hour video surveillance, heat, air conditioning and a charge for the battery, charged $1,200 a month. Now the monthly fee is around $500.
Use it or lose it applies to your classic car, too. They have to be started up every so often, or the brakes will seize, the clutch will stick, and the engine will rust. The more cars you have, the more difficult this can be. Jay Leno has a staff of four to "exercise" his cars. On the other hand, Ralph Lauren often lends part of his collection to museums where they temporarily become works of art. From April 28 to Aug. 28, the Musee des Arts Decoratifs in Paris exhibited some of his cars, including a 1958 Ferrari 250 TR and a 1938 Bugatti 57S Atlantic.
Count on unexpected repair and restoration
There is no such thing as a warranty when you buy a classic car, and even if it has been beautifully restored, it could have some serious mechanical problems. "If you're a first-time owner, it's worth researching the type of car you're interested in before purchasing it, as maintenance costs can vary greatly," says Hagerty's Klinger.
These can range from a $400 tuneup for a mid-1960s Corvette to $4,000 for a Ferrari 308, he says.
If you take your car to shows and competitions around the country, you'll be paying for airfare, hotels and transport of the car. Getting your car from coast to coast ranges from $1,600 to $2,000, says Hyman, the classic car dealer. But you'll want to spend money to make the car Concours-ready -- as near-perfect as possible.
"This can cost from $1,000 to $10,000, depending on if you just want the car polished or the engine re-detailed," Hyman says.