With yet another Ferrari 250 GTO selling for record sums, the world has its eyes focused on the funny little microcosm that can be described as“blue chip cars”. Investors are looking at high-profile classic cars as a potentially lucrative asset class, a way to diversify their portfolios in a world where interest rates are zero and the only investment offering decent returns are securitized car loans. Others think that it’s just another bubble, reminiscent of the million-dollar Hemi ‘Cudas that were crossing the blocks at Barret Jackson in the good old days before the Great Financial Crisis.
But none of that matters much to the average car enthusiast. At least unless we take into account the trickle-down effect which Jack mentioned in his recent article, or until someone starts an investment fund specializing in 1960s LeMans racers. Many people consider classic car investing to be the realm of the super-rich. They conclude that only the appreciated classics can be considered an investment, while cars within the reach of us peasants should be only looked at as depreciating goods.
And from the standpoint of pure investment, they are right. Every car costs money in maintenance, storage fees, insurance and other expenses required to keep its value – less so if you just keep it stored somewhere, very much so if you drive it. And these costs are not that different between, say, a Miata and an E-type Jag, so the cheap car will have much harder time recouping them through increasing value. Unless you lucked out and bought a 1971 Hemi Cuda in 1980, any ordinary car very much sucks as a pure investment.
But what if we look at it another way? If you consider the maintenance, storage and insurance to be a price for the fun you have with the car, you can look at the price increases alone – making even investing in relatively cheap cars much more interesting. Especially if the other option is buying a “comsumable”, heavy depreciating relatively new car and losing great amounts of money on it.
So, what is the best way to buy a fun car and lose as little money as possible on it, or even make some?
The key here is the depreciation curve. Every car, even the most mundane ones, has a point when it stops depreciating, starts to keep its value and, after some time, even starts to appreciate. For some cars, it takes many decades to reach the turning points, others get to it in just 10 or 20 years. Of course, you want to pick a car which will have steep appreciating portion of this curve, and buy it as close to the bottom of the curve as possible. Here’s my few ideas on how to do it:
1. Memories sell
If you look at most cars that really appreciated in value as classics, from the ’32 Fords and ’57 Chevys to Datsun 240Zs or E30 M3s, they are cars for young people. Or at least cars young people dream about – they are either cars that were cheap enough for young people to own, and stylish at the same time, or the ones you dreamed about as a child or young adult. Ask any owner of a Lamborghini Countach or Ferrari Testarossa why he bought his car – I am willing to bet some money that one of the most common answers will be “I had it as a poster on the wall/scale model/toy” when I was a kid. And with computer generation coming to age for buying supercars, maybe you’ll hear “I drove it in original Need For Speed” as well.
If you want to find a car that will have a steep appreciation curve, you need something loved by kids/young adults. The best choice is a car with a cult following, with bonus points for every movie or song about it. And even more bonus points for cars popular with a tuner/hotrodder/donk/crowd.
In the 1950s, cash-strapped kids modified their junkyard pre-war Fords to go fast, or their used Mercurys to look cool. Now, they keep doing it as old guys with money to spend, moving those vehicles far out of reach for any today’s kid. But today’s kids also have their toys – do you think all those guys with tricked-out Civic Coupes, CRXs, Nissan Sentras or DSMs will grow up, get wise and, embarrassed by their youthful mistakes, start collecting classic muscle cars or Italian sports cars? No way. Hot rods went into style decades ago. Today, 70s tacky modified muscle cars and custom vans are starting to become appreciated. And in one or two decades, there will be classic JDM car meets, and NOS, rear wings and Fast and Furious vinyls will be changing hands for outrageous sums.
Of course, that doesn’t mean that every clapped out family sedan that has a wing and stickers slapped on will be valuable. But cars that are popular in certain circles, be it aforementioned Civic Coupe, CRX, Chevy Caprice “box” or VW R32, will probably keep being popular in said circles, even as owners grow up and eventually grow old.
And the same goes for cars that didn’t achieve their popularity for being modified, but for their qualities – be it handling, performance or off-road abilities. Youths in 1950s and 1960s craved muscle cars, English and British small roadsters, but also various cheap cars, from VW Beetles and Buses to Minis. Look at what young people love today, and what will they remember in a decade or three. Fox Mustangs? BMW E30s and NA Miatas? Jeep Cherokee Xjs?
Of course, there are also many cars that people pay big bucks for not because they have fond memories of owning them when they were young, but because they dreamt of them. This concerns both affordable cars (like Kevin Spacey buying his Firebird in American Beauty) and expensive, or even outrageously expensive ones. And I strongly suspect that such childhood dreams are what propels the most crazy car prices ever higher.
Look at any crazy expensive classic car, and odds are you will see something a 15 year old boy could have dreamt of. It starts with the 250 GTO itself, and continues with Hemi Cudas, Shelby Mustangs and of course Lamborghinis, Ferraris or Porsches of all stripes. This is also one of the reasons why old zn Porsche or Ferrari is expensive, while old an Rolls-Royce or Mercedes usually isn’t. Boys dream about sportscars and racecars. They dream about speed and excitement, not about being pampered by soft leather seats, listening to classic tunes in total silence. Thus, old men’s cars will always be less expensive, making them worse investment material.
2. Practicality doesn’t sell
While being practical is very beneficial for the value of a used car, it has little to no effect on the value of a classic. In fact, it’s usually the opposite – classics are usually bought as toys, so people prefer body styles which are prettier and more fun to drive on weekends. So, with a few exceptions, usually the less doors, less roof or fewer pillars is usually more. The possible exception may be the wagon – as wagons are usually regarded as more cool than sedans, and they can be used for sleeping at car shows, or for hauling parts.
3. Rarity doesn’t equal high price
This is probably the most common mistake people make when assessing the car’s value. The fact that a certain vehicle is rare doesn’t, all by itself, mean it will ever become valuable. The value of any car in the world depends on the number of said cars available and number of people who want one. That’s why classic Mustangs are expensive, even though there were literally millions of them made, and why even classic Beetles are somewhat valuable, despite being one of the most produced cars in the whole history of the automobile. That’s also the reason why many truly rare, maybe even unique, cars will never be really valuable.
Case in point: the Chrysler 300 Hurst (pictured above). There were only about 500 made. It is a monstrous muscle car with 440-4bbl engine, fiberglass hood and trunklid, crazy spoiler, lots of stripes and hood pins. It has the Hurst name on it, and it was made in 1970, one of the best years of the muscle car era, and maybe even one of the best in history of car. It isn’t exactly worthless, but even nice examples go for similar money as a same year Plymouth Road Runner with no options – a car that cost about one third of what the 300 Hurst did cost, and more than 80,000 were made. If equipped with 426 Hemi engine, which was installed in about the same number of Road Runners as the total number of 300 Hursts, the Road Runner is worth at least five times as much as the Hurst, despite costing half as much at the time.
And the 300 Hurst was still at least a somewhat youthful car, with its muscle car image, stripes, spoilers etc. Fancy an Imperial from the same year? A few years ago, I imported a 1969 Imperial Crown Sedan for a friend of mine. Nice, original shape, and one of the 823 units of that model and body style produced in 1969. The price was $4,500, or about the same what a base Coronet from the same year would cost in rough, pre-restoration shape. A Super Bee from that year would cost maybe five or six times as much, even a low-optioned one. A Coupe version of the same Imperial would maybe come close to $10,000 mark, but would still stop far, far short of even the lowliest muscle car of the same age.
So, when someone offers you a “great deal” on some “rare and unique” car, of which only a few hundreds or thousands were made, think twice before pulling the trigger – odds are that they were made in low numbers because nobody wanted them when new. And in most cases, nobody will want them as classics, either.
4. Unreliability costs you twice
In the beginning of this article, I decided to take the maintenance costs out of the investment equation and consider them to be just a price for the fun you enjoy with your car. But even if you’re prepared to stomach crazy maintenance and repair bills, the unreliable, high-maintenance car will probably turn out to be worse investment than the reliable, simple one with cheap and easy-to-get parts.
Why? People tend to take the maintenance costs into account when shopping for cars, and they are willing to pay less money for cars that are known to require lots of cash to be kept on the road. Just look at the old Jaguars – maybe with exception of the E-type, all are pretty cheap to buy, and even the less desirable E-type variants (2+2s, later models, automatics) are not that expensive, considering their iconic looks, and the fact that they were one of the best sportscars of their age. Compare it to some top of the heap Mustang or Camaro – do you really think people would prefer having a Mustang fastback over E-type Coupe, if the cost to keep them running were the same? No? Me neither.
And looking at most popular classic cars, the ones with steepest appreciation curves out there – cars that were once bought for peanuts by young broke guys and now change hands for tens of thousands of dollars, most of them are of the simple, reliable kind. The aforementioned muscle cars. Porsche 911s and their air-cooled predecessors – the Porsche 356s, Beetles, Buses or Ghias. The old off-road workhorses, like FJ Land Cruisers, first generation Broncos, old Land Rovers or Mercedes G-Wagens. Old Datsuns and sporty Toyotas. In Europe, first and second generation Ford Escorts…
Of course, a large part of this may be just a coincidence – because reliable, easy to maintain cars tend to catch the attention of young people, becoming legends and living in their memories, which brings us back to the first point of this article.
But it doesn’t really matter whether this is a coincidence or not – either way, complicated and fragile monsters are usually bad investments. There may be some exceptions – for example, I think that prices of R34 Skyline GT-Rs will soar in the future, but generally, you should avoid that multiple-turboed, all-wheel-drive, hi-tech monster. It will cost you twice.
5. They’re only original once
Modifying cars is very fashion-sensitive thing. Fads come and go, and what was incredibly cool a few years ago may not be so cool today – and may become totally uncool in years to come, before coming back as “period modification”. Of course, there certain modifications on certain cars that can bring the value up, or at least not hurt is – typical examples would be traditional hot rods or customs, or “universally accepted” modifications on muscle cars. If you put a crate Hemi into a 318 Barracuda, add some stickers and special parts and create a Hemi Cuda clone, you will probably get your money back. And even things like period-correct alloy wheels (a set of TorqThrusts or Cragars S/S will never hurt anything) or some performance parts may be well-regarded by potential buyers.
But these are exceptions, not the rule. Unless you know pretty well what you are doing (and in that case, you don’t need this article), the rule is that originality is the king. And that’s not just about the modifications – original paint, upholstery, numbers-matching engine, all of that is going to improve tha car’s value.
And if you feel urge to improve your car, try to keep the changes as reversible as possible (so no body mods, please), and try not to be too creative. Famous brand name parts, popular mods typical for the time – these all can move the car’s value upwards or at least not hurt it. If you have an RX-7 FD with original Veilside bodykit, or a Mustang with aftermarket stuff from Roush, it’s probably good for the car’s value – although it will almost never bring back the money spent on mods. A BMW with huge rear wing and home-made turbo kit? Future crusher fodder…
6. Timing is the key
Most people tend to consider cars “investment worthy” only if they already have soared up in value. Ask average car guy about good cars to buy as investment, and you will probably hear something about classic muscle cars, 1960s Ferraris, E-types or maybe F40s. In other words, the cars that are already expensive, already in the appreciating phase of the curve, and which may or may not keep continue going upwards.
But the best investment is always the car right at the bottom of the curve. Something in the phase of transition from being “used car” to “youngtimer” (a German term for something that’s not quite contemporary but not quite classic). Of course, the earlier you buy, the higher is the risk of wrong guess, but you usually risk much less money. And there are many cars that represent a fairly safe bet on future rise of value – for example, looking at the BMW M3 (E30) values quickly rising in recent years, one could be pretty sure that E36 M3s will follow the suit shortly, considering that they were nearly as legendary as their predecessors. It’s also probably quite safe to assume that Fox Mustangs will become valuable classics, with the Generation X’ers entering midlife crisis and trying to relive their youth – and that SN95 will follow them later.
On the other hand, there are many cars which may have valuable predecessors or even successors, but don’t fetch any great money themselves – Mustang II and Porsche 911 996 come to mind here. So simply assuming that if one car became a legend and is appreciated by collectors, it’s next generation will do the same, is quite dangerous. But look at the car’s following, see if there any model-specific clubs or shows, how many people are likely to want the thing in the future, and you’ll have a good idea of what’s going to be valuable and what isn’t.
And the answer is…
We concluded that the best “investment car” for average guy is something that is generally loved and people have fond memories of it, it’s more of a toy than a practical car, is cheap and reliable, and not yet a true classic. Something you can buy for peanuts, enjoy with reasonable running costs, and let it slowly gain value.
I may be wrong about all of the above, but if I had to choose one such car, I would have to stick to the rule of our colleagues at Jalopnik – that the answer is always Miata. In this case, a first generation (NA) example in the best shape available, with the best engine and options available, and, in ideal case, some kind of special edition. Although there’s millions of Miatas, there are still lots of people who want one – and the continuing massive production will keep generating new generations of fan, who will eventually lust after the “true original”, the NA.
And what do YOU think will be the best “accessible investment car” in the near future?
The author is Czech motoring journalist, who wrote about old cars and ran his own column answering readers’ questions in Czech edition of Autocar magazine. He also spent a few years importing classic American cars into the country.