Monthly Archives: September 2013

It’s Time To Buy Your Classic Car

So you have spent hours watching “Fast and Loud” and “Dallas Car Kings” and “Chasing Classic Cars”, and the Mecum auction runs in your house like CSPAN runs at Nancy Pelosi’s house – all of the time. After such a glut of classic car buying shows, you are finally onboard – and you have come to a classic car insurance expert to help you decide if you can even afford to own a classic. Insurance is expensive, right? Wrong.  Assuming you aren’t purchasing a $3 million dollar classic, your insurance will be fairly inexpensive, as I have said before. However, there are other things you need to look out for when buying a classic that can certainly cost you money in the long run. Hopefully your humble author will help you avoid some of those pitfalls.

I’d better close my other “research” windows before the wife gets home…

1. The first thing you need to do is research. It’s not hard to find a classic that you like – heck, I see a few cars that I’d like to buy just about every day – and sometimes, I have acted upon that impulse. Since buying my first couple of cars (and learning afterwards what kinds of mistakes I made) I have instituted a firm “You had better research it” rule before purchasing anything. Yes, classics look supercool, but a lot can be masked by a good cleaning – you can get so impressed by the car that you overlook all of the bad stuff. In todays internet age, it’s very easy for you to find a group of enthusiasts for every car.  Take advantage of that; look, learn, and chat a little. Unless you are looking at a car that is only available every 20 years or so, take a breather and do some learning. My first ‘classic” was an automatic Porsche – and the piece that makes the automatic run is a giant rubber bagel. That giant rubber bagel is 2 things; expensive and fragile after 30+ years. Had I known that before buying the car, I would have bought a standard, and saved myself a $3500 repair bill. That’s where the research comes in. Learn before you buy.

 

This one is going to need a little body work.

 

2.  Inspect the car. This may seem like a no brainer, but with a lot of classic car purchases, the car might not be close enough to you to easily do an inspection in person. Photos can be deceiving, and might not show you all of the little things that the car may need. Tires can be cracked, there can be small rust and dings that aren’t readily apparent in the photos, and paint will shine even on a bad car if the photo is taken in the right light. It’s important to look under the car, check for rust and leaks, and etc. If you are not local, there are services close to most major cities that will inspect the car for a fee. However, before you pay one of these services, you should ask them what their inspection entails, and go over the specific items you are looking for on the car you are considering.

 

3.  Purchase your car. Most people buying classics have been saving up the money for a while – and whether your budget is for a “project” or complete car, you need to move pretty quickly, especially if you are looking at a rare and/or desirable model. If it’s nice enough for you to buy, there is probably someone else considering the purchase as well. Once your inspection questions are answered move quickly; make an offer right away. If for some reason you don’t’ have the cash to make the purchase outright, there are companies that will finance a classic – but you want to have that all lined up before you find your car. Then once you find it, you don’t have to wait for approval. If at all possible, try to negotiate with cash, because waving a preapproved check doesn’t get you the best deal – but fanning a handful of hundreds tends to get the seller’s attention.

Classic Auto Insurance (20) 4. Arrange to get it to your house. There are multiple shipping companies out there that will ship a classic (or anything else) you want to get across country. There is even a chance you will get on TV if you accept the right bid. That’s assuming your car is an ultra low mileage example, or undriveable. If it’s a good, road worthy car, simply ensure you have roadside assistance on your policy and fly in to get the thing and drive it home. Enjoy your honeymoon with the car, plan a vacation around it, and enjoy your new purchase. There is nothing quite like a road trip in a classic, and there will never be a road trip that is more exciting than your first trip in your new old baby.

 

Make sure door dings aren’t going to be an issue.

5. Arrange for storage and maintenance. This should probably be done first, but it’s an important consideration. I assume you have a regular car that you will be driving on the regular, and that it probably lives in your garage. ?Unless that car (or the wife’s car) is getting the boot, you need a place to store your presumably expensive new toy.  There are many storage facilities and many levels of storage – everything from air conditioned storage with “car exercisers” to start your car and keep it running, to places that have enclosed storage with nothing more than a roof and 4 walls. In addition to storage, you need to arrange for maintenance.  Lots of mechanics have no idea how to work on a classic – so you need to find a specialist. Ask around at car shows and see who your new friends use.

 

6. Get insurance. I guess this should have happened when you bought the car, but you do need insurance. Don’t just “put it on your regular policy”, because most “regular” policies don’t cover classics as they should – you will most likely end up on an actual cash value policy – which means that your car is paid out on the cost to purchase another – less depreciation. That’s the part you need to be worry about. Depreciation is the killer there; by definition a classic is an old car. If they depreciate it at the minimum of 1% a year, you are losing value there. Instead, do it right and call a classic insurance expert. When you put a car on a classic policy, you arrange for “Agreed value” coverage – which ensures that you are covered for what you have in the car. It’s a good idea to think realistically as well and remember that while you got a good deal today, you might not be able to get one in six months. Plan (and insure) accordingly. Most classic cars tend to appreciate in value, so insuring for what you paid today could make it hard to find another should something happen.

Obviously, these aren’t all of the things you need to consider when purchasing a classic (or exotic) car. These are the mechanicals you should consider. I’ll do another post soon that delves into the best ways to make an “investment” in a classic. There is much more to consider on that front, but for now if you already know what you want, this list should help you make a wise purchase. When you find your dream car, I look forward to talking to you about how best to protect it.

Bond. Performance Bonds.

 

A clever headline, yes. It might even be the reason I’m writing this blog post at all, to be honest. Actually, no, that’s not fair – it’s only 50% of the reason I’m writing today. The rest of the reason is my relentless need to answer questions. Since we have opened the doors of our commercial department, we seem to have more and more contractors asking us about bonding. At first, we wondered if our reputation as amateur glue makers had gotten around, but after some thoughtful probing we realized that people were interested in learning what it takes to get a performance bond – and we learned why you should start the process before you actually need the bond. Hopefully this blog post will help you prepare so you can get the big jobs.

First, let’s get this out of the way – “What does a performance bond do?” An excellent question, and one that I am more than happy to answer. A performance bond guarantees the project time – so that if the project isn’t complete in the agreed upon time period, the bond is forfeit – and the person doing the renovations can use that money to hire another contractor to complete the job in a timely manner. Generally, performance bonds are required by companies doing large scale time sensitive projects, as well as by municipalities doing public works projects.  A bond will be posted in the amount of the bid – so if you bid $160,000 to re-letter the town water tank, and you tell them you can do it in six weeks, you would post a $160,000 bond with a six week timeframe. If the job isn’t done, or isn’t done correctly (you paint it upside down) then the city has $160,000 to start all over again.

What does it take to get one of these bonds? It’s actually a lot like getting approved for a loan. Since the insurance company is guaranteeing your work, they want to get to know a bit about who they are partnering with – and they are partnering, because the bond for the $16,000 job up there, it only costs a few hundred bucks. How is that for some risk?

So what do the insurance companies need to know in order to get you bonded? First, they will need financial records, prepared by a CPA – records for both the business, and for the owner. I see you over there, asking “why” – because they are putting up money at pennies on the dollar that you are a reasonable person – who won’t abscond with the first payment, or who needs the money from this job to pay off  a job he did six months ago. One can never tell who will be bad with money, but having someone with a solid financial history on paper is better than nothing  – and I promise, you aren’t getting a bond until the company sees your statements, so go ahead and start putting them together now. Don’t know who to call? Call us, we will help you find someone.

Start typing up a resume while your CPA works on your financial statement. Obviously, it’s no all about whether you are going to split with the money – they also need to know that you are actually capable of getting on that water tower and getting the letters painted. So put together a resume for the company to look at. You can leave off the job you had at Wendy’s in high school – but if that’s your only experience and you are looking for a performance bond, you might just be out of luck.

Finally, the bonding company is going to want to know what your last few jobs looked like. Put together a description of your last five or six jobs, and what they cost. Once again, the insurance company is going to be backing you with their money – so they need to know that if you are bidding big jobs that you have done more than handyman work over the past year.

Once you have done all of those things, we will fill out an application and send your paperwork off for a Bonding Pre-Qualification Letter. As you can see if you read this post (and if you aren’t reading, why are you spending so much time on this page?) it takes some time to put a bond together. I bet you can also see that it wouldn’t pay to bid a job and then realize that you don’t qualify for a bond in the amount of your bid. In fact, some government projects may require a Pre-Qualification letter to be submitted with a bid. With proper preparation, you can bid jobs to your heart’s content, and know that if your bid is selected that you can be at work in a matter of days, rather than weeks.  Call us today and let us help you make the next step in your company’s evolution – and let us make it a pleasant experience.