FAQ: Is Classic Car Restoration a Good Investment?

Occasionaly new enquirers at Finch Restorations ask whether restoring a classic car is a good financial investment. A common misconception is that restoration budgets should be capped at the final (restored) value of the car. In reality, very few customers adopt this approach, although it is a naturally occurring feature with high value vehicles.

Why Do People Restore Classic Cars?

Most of our customers restore vehicles not for financial gain but because of their deep connection to the car. Generally, these motivations fall into three distinct categories:

• Collectables: Enthusiasts who enjoy collecting cars of a particular marque and seek a high level of authenticity. They see their collection as a legacy, preserving automotive history.
• Heirlooms: Owners restoring a vehicle that has been in the family for decades, often inherited from a parent or partner, making it a cherished piece of personal history.
• Dream Cars: Individuals who have reached a stage in life where they can finally acquire and restore the car they always dreamed of in their youth.

For most, restoration is fueled by passion rather than speculation.

Does the Value of Classic Cars Appreciate?

While many assume that restoring a classic car should be judged in the same way as purchasing a modern vehicle, the financial realities are quite different. Unlike modern cars, which experience rapid depreciation, classic and collectible vehicles often appreciate in value over time.

To illustrate this, let's examine the depreciation trends of modern vehicles compared to classic cars.

How Fast Do New Cars Depreciate?

New vehicles typically lose a significant portion of their value in just a few years:

• In the USA, new cars depreciate between 10% and 40% in their first year, with most falling closer to the higher figure. (Quora)
• In Australia, new cars depreciate at a rate of 16% to 24% annually for the first four years. (Drive)

Breaking this down further:

• Small cars and sports cars: Depreciate at an average annual rate of more than 16%.
• Luxury, prestige, and medium cars: Depreciate at an average annual rate of more than 19%.
• Large cars: Depreciate at an average annual rate of nearly 24%.

For example, a brand-new car purchased for $50,000 will typically be worth:

• Only $30,000 after two years.
• Only $20,000 after four years.

In contrast, a well-chosen classic car not only holds its value but often appreciates over time.

How Fast Do Classic Cars Appreciate?

Classic car appreciation varies depending on the model, rarity, and historical significance. Hagerty, the world’s leading collector car insurance provider, tracks the appreciation of classic cars through various indices:

• Affordable Classics – averages the values of 12 undervalued cars, priced under U$30,000, from the 1950s-70s. The average appreciation rate for these cars is 3.3%. Discover the hidden gems of automotive history that promise both joy and a smart investment.
• "Blue Chip" Index – Tracks 25 highly sought-after post-war automobiles. The average appreciation rate for these cars is 17.4%. Invest in the pinnacle of automotive excellence and watch your investment grow alongside their legendary status.
• 1950s American Classics – Covers 19 of the most collectible American cars from the 1950s. The average appreciation rate for these cars is 1.5%. Revel in the golden era of American automotive innovation and own a piece of cultural iconography.
• American Muscle Cars – Tracks the rarest and most sought-after muscle cars. The average appreciation rate for these cars is 1.9%. Embrace the raw power and bold spirit of the American Muscle, a true reflection of automotive passion and performance.
• Post-War British Cars – Features iconic British sports cars from the 1950s-70s. The average appreciation rate for these cars is 5.2%. Step into the world of refined elegance and engineering excellence with these timeless British classics.
• Post-War German Cars – Tracks 21 highly collectible BMW, Mercedes-Benz, and Porsche models from the 1950s-70s. The average appreciation rate for these cars is 16.5%. Experience the unmatched precision and iconic design of German engineering through these collectible masterpieces.

What If I Restored a Classic Instead of Buying a New Car?

Let’s compare a $50,000 investment in a modern car versus a classic car restoration.

If instead of buying new, our car buyer spent $50,000 acquiring, transporting, and restoring a collectible car, which was initially valued at $30,000 post-restoration, their financial position would likely be stronger:

• **After two years, they would still have a more valuable and appreciating asset than a new car.
• **After four years, they would likely be $10,000 ahead compared to buying new.
• **Long-term gains: Depending on the vehicle, they may have fully recovered their investment at a time when the new car has depreciated to just $5,000.

Final Thoughts: Is Classic Car Restoration a Smart Investment?

If you’re purely looking to speculate, remember that the true value of classic cars extends beyond dollars and cents. Unlike modern cars, which are mass-produced and lose value quickly, classic cars carry an intrinsic charm, historical significance, and an emotional connection that modern vehicles cannot match.

So, is classic car restoration a good investment? If you follow your passion, choose wisely, and restore with care, the rewards can be more than just financial—they can be timeless.

🔹 Have a project in mind? Contact Finch Restorations today to bring your classic car dreams to life!