The pitfalls and downfalls of buying classic cars

The number of vintage cars registered on the UK roads continues to rise at a steady pace. According to the Association of the Automotive Industry, which annually evaluates the figures of the Federal Office of Motor Vehicles, the number of registered antique cars increased again by a significant 10.8 percent as of January 1st, 2017 amounting to a record high of 381,027 vehicles.

With the classic car boom, however, the number of black sheep in the market, which is now worth billions, is also increasing. Deception and fraud are commonplace. For an in-depth study, Classic Trader surveyed more than 300 buyers and sellers on the subject of dangers and risks when buying a classic car. 35 percent of all respondents stated that they had already experienced overpricing at least once during a purchase.

When it comes to buying a vintage car, it is important to do your homework. What are the biggest risks? How does one make a successful purchase? What should you be careful about when buying a classic car? The following graphs, diagrams and tables will give you enough insights to make a smart and informed decision.

Back to basics – Who buys vintage cars?

Classic cars tend to attract predominantly male attention. Indeed, according to the survey, almost 96 percent of classic car buyers are men while only 4 percent are women, and less than one percent stated that they do not fit into any gender category. Most buyers are between 41 and 50 years old - almost 35 percent - while the under 21-year-olds, unsurprisingly, make the smallest segment with just half a percent.

41 percent of those surveyed stated that they had bought between one and three classic cars during their lifetime. These are car enthusiasts or buyers looking for a second vehicle. The situation is different for the remaining 60 percent who have bought more than three classic cars: these are either dealers or collectors who are speculating on their vehicles increasing in value with time. This assumption is substantiated by the low number of sellers: 41 percent of those surveyed stated that they had never sold a classic car before. In times of low bank interest rates, this is an understandable yet risky initiative.

Classic car fraud

Despite their genuine love for classic cars, buyers face a lot of scams. Fraud is not uncommon, as evidenced by the information gathered in the survey. Nearly 35 percent of the buyers interviewed said they had been deceived once before - 70 percent of which stated that they had been tricked when purchasing in UK, 44 percent said this had happened abroad.

The greatest risk is by far possible hidden defects. More than 80 percent of all concerned buyers indicated that they had already purchased a vehicle with defects that were not visible at the time of purchase. Other common cases of fraud include concealed accident damage (33 percent) and tampered speedometers (18 percent). Repairs can add up. In some instances, fixing the car can be more expensive than the actual purchase price.

Furthermore, once a sale is final, and money has changed hands, it is, in some cases, almost impossible to reclaim. A rare, although very costly, risk is payment fraud: 2 percent of respondents said they had been tricked once before by a fake escrow service or cash transfer.

Due to the large price range of individual vehicles, it is difficult to determine an average value for the financial losses incurred. Overall, however, the damage suffered by all those surveyed who were deceived was more than 700,000 euros with an average of around 8,500 euros.

Beware of traps - Where the greatest dangers lurk

The following subjective assessments of the greatest risks involved in buying a classic car are based on the personal experiences of survey participants. For 77 percent of respondents, hidden defects represent the greatest risk, followed by concealed accidents (61 percent) and manipulated speedometers (nearly 40 percent). Such risks mainly – yet not exclusively - tend to affect non-professionals.

Almost 18 percent of respondents also consider the process of payment to be risky. There are indeed many reports of advance payments on alleged bargains, vanishing haulage companies acting as fiduciary agents, or fake papers. Also, bringing a large sum of cash to a strange, new location isn’t the most comfortable feeling anyway. When it comes to selling vintage cars as many as one in four survey participants sees the greatest danger in handling the payment.

Transactions

More than 81 percent of respondents reported that they had settled at least one of their purchases in cash. 34 percent of those surveyed indicated that they had instructed bank transfers in each case while 3 percent stated that they had used a trustee service or a lawyer's escrow account to process the transactions. A glance at the rating of payment methods by the respondents provides insights into the reasons behind the preferred methods of payment.

86 percent of respondents said that cash payments were the easiest way to settle the purchase of a vintage car. This method is also by far the cheapest. However, one should never walk alone with large sums of money for cash payments.

Only a lawyer's escrow account surpasses the perceived security of cash payments: more than 65 percent chose this payment method as the best means of transaction.

Trustee services (53 percent) came third as the preferred method of payment.

These two last methods are chosen the least, despite a high degree of security, because of their complexity (both payment methods were judged to be too cumbersome by 68 percent of the respondents) and the associated costs (70 percent of the respondents rated the lawyer's escrow account as expensive or very expensive). However, in the case of trustee services, a certain amount of precaution is required. This is especially true in the case of carriers or shipping companies, which claim to be acting as fiduciary agents. The forwarding agents commissioned often do not exist or have a fake website and disappear immediately after the transfer has been made only to reappear elsewhere shortly after.

Conclusion

For car lovers, collectors and investors alike, the purchase of a vintage automobile is not only associated with considerable investment and great effort, but it also involves a certain amount of risk. A large proportion of those surveyed - 35 percent to be precise - has already been deceived when buying a classic car. If the expected vehicle turns out to be an absolute disappointment after signing the contract or if the alleged seller does not show up after the first deposit, it is almost impossible to get any money back.

There are many possible sources of fraud. A tampered original condition can often only be detected by a skilled vintage car expert. With some offers on the internet, caution is often required. In any case, never proceed to any prepayment to an alleged escrow account or wire cash. To be on the safe side, always have the vehicle inspected by an independent expert before going forward with the purchase, pay attention to any unclear clauses in the contract and stick to the following motto "money for goods". As a rule, when something is too good to be true, it is most certainly not true.