Millions of Americans are involved in car collecting. The old muscle car or British roadster you bought in college may still have a place of honor in your garage and see use as a weekend cruiser. A restored vintage Volkswagen Beetle or suicide-door Lincoln Continental can be purchased for less than $20,000, driven lightly for years, and then sold for a (probably modest) profit.

But what about high-end collectibles that cost seven or eight figures? They aren't for everyone, but high-net-worth individuals can use them to diversify their holdings, make money, and maybe even drive on occasion.

The market for classic cars has done better than collectibles like coins and stamps over the past decade and has also beaten the broad stock index. The Historic Automobile Group International (HAGI) tracks the collector's car market with a number of indexes. Its broadest is the HAGI Top Index, which tracks vintage collectible cars from Porsche, Ferrari, Bugatti, Alfa Romeo and other brands. The Top Index was up 13.78% year-to-date through August and more than 500% over the preceding 10 years thanks to increasing global wealth chasing a limited number of super-collectible cars. The S&P 500 was up only 60% in the same period. Another classic car index is run by the insurance company Hagerty.

At the high end of the classic car market — those selling for more than $1 million — you'll find relatively obscure older brands such as Hispano-Suiza and Delahaye, as well as names that are still well-known today, such as Rolls-Royce and Jaguar. Even brands not known for high-end exotics may become collectible: Toyota's (TM) beautiful 2000GT, built from 1967 to 1970, can command more than million at auction. A 1934 Packard Twelve 1108 Dietrich sold for $3.6 million earlier this year, and a 1998 McLaren F1 sold for $13.75 million. (For related reading, see: The Best Sports Cars for Investors.)

What Makes a Car Collectible

Cars with historical importance—ones that pioneered new technology or raised the bar for consumer expectations—can become collectible, especially if they are rare and beautiful. (Being good-looking is an advantage.) A racing history adds to a car's allure, as can association with a respected designer, racer or builder such as the likes of Raymond Loewy or Carroll Shelby. Prior celebrity ownership can also help, especially if the individual is associated with cars, such as Steve McQueen, Paul Newman or James Garner. The most expensive collectible cars combine these attributes.

As a basic rule of thumb, if teenaged boys have its picture taped to the wall, you're looking in the right direction. When those boys grow up, they want to buy the things that made them happy in their youth.

The car market mirrors the market for art. It's an investment you enjoy aesthetically and it can also provide a currency hedge since vehicles can be transported to countries with favorable exchange rates.

Car Investing Risks

Just as most investments carry fees, so too does owning classic cars. This is tangible personal property, and you'll owe capital gains tax if you sell at a profit. Is your collectible in bad shape? Restoring a seven-figure car to concours condition—generally considered bringing an older car to showroom-new condition using original or exact recreations of parts, paint, and bodywork — can cost another seven figures. Then there's ongoing maintenance costs, storage expenses, and insurance. Profits from the eventual sale of the car will also likely incur commissions/consignment fees, transaction fees, and transportation costs, because chances are you aren't going to tow a Bugatti behind a U-Haul. (For related reading, see: 5 Tips for Vintage Car Collecting.)

Buying a new or newish car because you think it will be collectible some day is risky. Sure, you could get lucky, but chances are you aren't going to be able to buy a cheaper car and expect it to be worth millions in a relatively short period.

When the Dodge Viper was unleashed in the early 90s, some collectors squirreled them away as investments, believing that the aggressively styled sports car with a then-ludicrously-potent 400 horsepower would certainly appreciate in value. But you can currently pick up a 1993 Viper (the first full year of production) for less than $40,000. They cost more than $50,000 new. These investors may have enjoyed showing off their cars and occasionally blasting down an open road, but with inflation, upkeep, insurance, storage and opportunity costs, they most certainly did not make any money.

The same thing happened a couple of decades earlier, when Cadillac announced in ads that the 1976 Eldorado would be the last convertible the brand offered. It wasn't. You can now find well-cared-for Eldorado convertibles from that vintage for less than $25,000. They cost $11,000 new, which is $47,000 adjusted for inflation.

Affordable Options? Not Really

One could argue that the American Viper and Eldorado are at the affordable end of the collectible spectrum; not the high-end stuff that tends to come from Europe. But the same uncertainty applies to the high-end market. In 1974, Ferrari sold the Dino 246 GT for $14,500 and the 308 GT4 Dino at a significantly higher $22,000. Currently, Hagerty lists the average price of a 1974 Ferrari 308 GT4 at $49,000 and a same-year Ferrari Dino 246 GTS at a whopping $417,000.

So, what are the ultimate collectible cars? It's hard to say definitively. Tastes change over time, private sales are difficult to track, and the high end of the collectors market focuses on exceedingly rare cars with differing histories. The list of sales that are confirmed to exceed $30 million in inflation-adjusted dollars is extremely short though.

The British auction house Bonhams sold a 1962 Ferrari 250 GTO for $38.1 million in 2014, which is the highest confirmed and published price ever paid for a car. The race car had been driven by legendary driver Stirling Moss at the height of his career. (Another 250 GTO reportedly exceeded $50 million in a private sale.) In 2010, the Mullin Automotive Museum purchased one of the four achingly beautiful Bugatti 57SC Atlantic ever built for what an insider described as between $30 million and $40 million. In 2013, a 1954 Mercedes-Benz W196 Silver Arrow — the only car of its kind not in a museum — sold at an auction in the U.K. for $29.7 million.

The Bottom Line

Becoming collector of high-end cars can take a pretty significant investment and comes with not-insignificant carrying costs. As tastes and economics change, what was once worth a king's ransom could depreciate to a mere princely sum, so choose carefully. Red and Italian tend to be good bets, but be aware of over-frothy markets. For example, wealthy Japanese buyers couldn't buy enough Ferraris in the second half of the 1980s and prices saw an unbelievable spike and then a bubble. When the Japanese stopped buying those prices dropped by a big percentage. Buy quality (a prime example will always be marketable and command a premium), know your demographic and market factors, and make sure you're not buying while in bubble territory.