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Sunday, August 16, 2015

Don’t Be Fooled, Collector Cars Can Be Great Investments



With all eyes on Pebble Beach and the countless cars being auctioned off, it’s sometimes easy for journalists to get jaded on what these cars actually represent. We talk about the cars racing history, who once owned them, and how fast they can go, but in reality, these cars are nothing more than investment materials for rich people and their friends. However, over the course of the last few years, several journalists have looked at the so called Ferrari Economics, and stated that while you may think a classic car is a good investment, it almost never is.
Recently, Bloomberg Business took up this argument. The op-ed analyses the classic car market and talks about why betting on a classic car could be terrible as a major investment.


In the piece, Bloomberg Business cites classic muscle cars, 50s era boats, and other classic cars from the 60s and 70s as proof that classic cars aren’t the best investment and states, “The Pebble Beach sales, like most marquee car auctions, are an exception. Only about 3 percent of vintage cars sell at auction and they are the best of the best. It’s like watching a super-cut of holes-in-one and deciding to try your hand at golf.”
While the analogy is over simplified, we tend to agree with it to a point. Most classic cars are truly not worth investing in. Classic muscle cars, for instance, have a completely saturated market, and the buying public that was once clamoring for these cars is slowly dying off and with that, so are the prices. Cars, like stocks, have bubbles. Sometimes it’s tech, and sometimes it’s muscle cars, but after a certain period of time, those both tumble and you are out quite a bit of money. It then becomes knowing when to buy and when to get out.

Take the recent rise in classic Porsche prices. These cars could be traded a few years ago for around the same price as a base model Tesla Model S. Now, the price for classic air-cooled Porsche’s have skyrocketed. But as the number of Porsche’s out there dry up, and the buyers of these begin to die off (sorry), you’ll see the price of these cars tumble just as much as we saw the price of muscle cars tumble.

However, that doesn’t mean that classic cars are bad investments. On the contrary, they can make amazing investments, provided you do your research, pay attention to trends, and purchase the right car. Just like stocks, cars need to be analyzed to make sure they will be profitable in the future.

Low miles, while a sin in any enthusiasts book, actually matters quite a bit in the collector car market. Same with low production volume, and low serial numbers. Additionally, when first looking for a car that could appreciate in value, you need to look at the cars history and provenance.

For example, the Ferrari Dino used to be an absolute pariah in the Ferrari community. Ferrari enthusiasts practically shunned the car from all events. Then a few years back, people began seeing the inherent beauty of the car, and the history behind it. Dino prices began to tick upwards. Not so much that they’d cause a riot, but just a slight rise in value.

Personally, I lamented this uptick since I had always wanted a Dino, and for a while there, I thought I might be able to own one in my lifetime. However, Dino prices are now edging ever closer to the seven-figure mark, and all my hopes have vanished.

Classic cars can indeed be bad investments, as well as hugely successful ones, but as mentioned above, you need to treat them like stocks. Do you homework and you have a far less likely chance of getting burned when it comes time to sell.

 And while some of you may think you need to already be wealthy to play this game, the Dino I spoke of above, in 2006 was going for under $50,000. One just sold for over $400,000. There are plenty of other cases such as this out there; you just have to know where to look.