By on January 27, 2011

IGA Automobile, a new closed-end partnership fund, is planning on investing $150m into “a collection of 20 to 40 trophy marque vehicles with distinguished race or ownership histories” which it claims will appreciate some 15 percent over the next seven years, according to the Detroit News. Though collective buying of super-exotic cars is not new in itself, IGA Automobile fund Director Lancaster claims

This is the first classic-car fund that’s purely for financial returns, rather than passion

The fund, which is advised by Pink Floyd drummer and car nut Nick Mason, has identified several “potential acquisition targets” including the Ferrari 250 GTO, Aston Martin DB4 Zagato, Ford GT40, McLaren F1, Shelby Daytona Coupe and Porsche 917. And, since investors in the fund will be shelling out a minimum of half a million dollars to buy cars that they won’t even be able to keep in their own garage, the investment had better have a chance of making some money. And the fund’s managers think they can make that pitch, as

The Hagerty’s Cars That Matter “Blue Chip” Index, based on the values of the 25 most collectable postwar vehicles, has increased 67 percent from September 2006 to the end of 2010… The Historic Automobile Group International (HAGI) Top 50 index of exceptional classic-car prices was up 6.6 percent in 2010, lower than its average annual growth of more than 12 percent from 2003-08.

That’s better than plenty of investments did over a similar time period… but luxury-goods speculation still has a shaky track record. Besides, doesn’t it seem just a little bit wrong to treat these epic classics like a bond certificate, keeping them stashed away in a vault somewhere? Here’s hoping there’s room in the business plan for some kind of museum.

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25 Comments on “Can You Make 15% Per Year Investing In Classic Cars?...”

  • avatar

    I agree that’s just all kinds of bad.

  • avatar

    I think when even cars are being turned into investment grade speculation, something is very wrong economically.
    Besides, didn’t the Japanese do this during their crazy years, and didn’t they loose their shirts? They may not have hedged like this, but it was the same basic idea.

  • avatar
    Jerry Sutherland

    That seems a lot wrong-makes me want to use my old Pink Floyd albums for skeet practice.These guys have no soul for the old iron…

  • avatar

    What, as if investing in derivatives, CDOs, SIvs and all the other junk out there wasn’t bad enough, now you can invest in “classic” cars.  Sounds like the perfect vehicle(pardon the pun)
    for people with more money than brains.

  • avatar

    Seems like a bad idea.  Sure, the cars appreciate.  But you will have rent and utilities to house them and keep them warm/cool, you will have insurance and maintenance costs.  Plus some management salaries, transactional costs if you buy or sell anything.  Maybe this is somebody’s way of getting other people to subsidize a great car collection, but I can envision all kinds of legal issues here.

    As for the cars themselves, what is the timeframe?  Stuff that was hot in the 70s or 80s may be less so now, with other things becoming hot in the future.  I guess the middle of a big recession is as good a time to start as any, but I don’t think that I will be investing.

  • avatar

    When a hobby gets confused with a hedge fund it’s time to walk – no, run – away from the collector car market.

  • avatar

    Remember the Ferrari bubble of the 1980s?  Daytona coupes going for over $1 Million.  Can (and will) happen again.

    What’s next?  A Beanie Babies fund?  These hedge fund people make PT Barnum look like a grifter.  I imagine Goldman Sachs has already offered a CDS for this fund.

  • avatar

    Making a million dollars in classic cars is pretty easy. Start out as a billionaire, buy a bunch of over priced classics and wait a few years. Instant millionaire!

  • avatar

    Not if you drive them the way the guys in your accompanying photo do.

  • avatar

    There’s a fine line between “hobby” and “insanity”. Back when I owned my avatar – a 1964 Chevy Impala SS convertible, I bought it June 19th, 1970 for $800.00. I sold it three years and three weeks later for $625.00. Those cars were worth nothing then. Only a couple of years later, they began to appreciate. Now you can’t find one in the shape I sold mine in for less than $28,000, questionable restoration at that. Mine was my daily driver and beautiful, the northern California Sacramento Valley climate helped. Is it worth it? Absolutely not, in my opinion. Sure, I wish I could have that car back, but at what price? I personally would not pay for a car any more than what it cost new (I’m speaking of a “classic” car). An old air force buddy who’s since passed away four years ago owned one of those Ferraris. I believe he sold it in the 70’s before they went crazy. He had no regrets, though. Every time I see a classic car, I find all sorts of flaws in the restoration that would not pass muster with me. The ones that are in perfect, better-than-new condition belong in museums, because they’re trailer queens, which is an obscene term to me.

    • 0 avatar

      Rule of thumb is that cars only start to appreciate after 10 years – by 20 years old they are either worth alot or not.
      The issue with classic muscle cars is that replacement parts just were not available 30 to 40 years ago such as they are now via that internet thing and wholesale CAD development plus offshore manufacturing.
      Get into Hummers cheap the next time gas spikes to $3-$4- buy a couple and stash them away. By the gas crisis of the early ’70s, car dealerships were removing the noses and wings of Plymouth Superbirds since no one wanted to buy them all crazily jazzed up- the dealers might have even replaced the engines with smaller ones just to sell them.

    • 0 avatar

      While new 1970 Plymouth Superbirds didn’t sell, I think the story that dealers replaced the nosecones to try and unload them is something of a myth. The only dealerships that I know of that really did that were in Maryland because the state wouldn’t certify the nosecone as a bumper.

      The reason other dealerships likely didn’t replace the nosecones is because of how involved the process would have been. The Superbird didn’t use Roadrunner fenders or hood – they were actually from a Dodge Coronet. I’ve always held the belief that the reason the 1970 Coronet had that kind of weird front end was specifically to be able to accomodate the Superbird nosecone. I suspect that the original plan was for a 1970 Charger Daytona based off the Coronet but to get Petty back with a Plymouth wingcar, the Coronet hood and fenders went onto the front end of a Roadrunner, instead.

      Anyway, to switch a Superbird to a Roadrunner would involve not only a new grille and bumper, but new fenders and hood, as well. I just can’t imagine any dealers going to the trouble and expense unless they had no choice (as in Maryland).

  • avatar

    Damn!  I had this exact same idea a few years ago!  There are funds that hold physical gold bullion and even physical uranium, for example, so I figured why not a fund that holds collectible cars?
    Admittedly, even though it was my idea, I would not invest in such a fund…  I would love to manage it though!

  • avatar

    Please take that extremely upsetting picture down immediately.

  • avatar

    I was under the impression most car collectors do that now , buy a car with hope of reselling it for more …. have to admit , I felt that a little when I bought my 64 Skylark Sport Wagon or 96 Roadmaster wagon  , not that I would sell them  …. but still , if the price is right

  • avatar
    Educator(of teachers)Dan

    Cars should be bought and driven.  Collector Car is an oxymoron.  If you get lucky you might make money, but like Ed says, don’t buy cars just to “stash away.”  Buy stamps or coins if you want to do that… please.

  • avatar

    Kids, we are not talking about ordinary collector cars like MGBs and E-type Jags or some nice but common musclecar. These guys are talking about cars that cost in the MILLIONS of dollars. Ferrari GTOs, Bugattis and Ford GT40s. Sure there may be a bubble like in the 80s, and the bubble may break, but the absolute blue chip cars like these will always, always, always recover thier value. So you ride out the valley to the next peak and smile.

    It was the ordinary stuff like Daytonas and E-types that people got burned on 20 years ago – now the best of those cars are worth more than they were then. But the average person who bought a $50K car as a retirement fund was just stupid. The folks who are buying into this at $1/2M min each are in a whole different world.

    And realistically, it costs the same to properly store a $10M car as a $50K car. As a percentage of value the storage costs are irrelevant. And I bet they have “investor days” where you get to go drive the things. Try that with a regular money market fund.

    But ultimately, I think it is sad. Cars are not meant to be locked away in vaults, they are meant to be driven and enjoyed.

  • avatar

    Buy cans of food with extremely long shelf lives and basics such as beans and rice packed in a manner, such as with nitrogen and secure seals or whatever, to allow you to survive future not-so-good events.
    Other survivival-related items at relatively low price may be a good idea and a few el cheapo acres in an area with fertile land, easy-to-get water and away from the BIG metro areas.
    Heck tarnation; my area is a better-than-many area conducive to survival.
    Unless, of course, you actually expect the USA to, in the long-term, escape economic collapse or societal collapse but I fear the portends of future calamity do not bode so well for the masses.
    Toss in some natural cataclysmic events such as drought, major earthquakes, famine or pestilence or pandemic and your current complacently will be knocked askew BUT
    breathe a sigh of relief for your masters will be well-taken-care-of with mega-billions of bucks available to ensure their survival and comfort while the vast majority of you crass commoners are tossed to the side.
    Just one Disgruntled Old Coot’s opinion.
    Beware, though.
    Old Coot will attack viciously if provoked or if I believe my selected dumpsters are being violated.

  • avatar
    M 1

    I hear Bernie Madoff needs a new cell-toy.

  • avatar

    I know somebody who loves cars. Loves to drive them most of all. He’s owned several post WW2 classics, from an old MG TD and a Jaguar XK 120, though an R107 Mercedes-Benz.
    In 2000 he chanced upon a dream car at a good price, a 1957 Mercedes 300sl and bought it. He loved it and drove it often.
    Last year however he decided he could no longer drive it because it had appreciated in value 450%(!) in nine years. It broke his heart, but he just could not justify the risk of driving a relatively low-tech, drum-braked car on roads surrounded by distracted, innattentive idiots when it was worth so damn much money. That and the fact that all his other investments had lost more than half their value at the same time.
    So he sold it.

    • 0 avatar

      That’s pretty good – I’d have done the same thing. I post this because, ironically, a Chrysler ad on TTAC is advertising PT Cruisers! Didn’t they stop building them last summer? I wonder if I bought one now, how much it would be worth ten years from now? It’s a nice thought, as I don’t have the resources to waste on such speculation anyway. I had an opportunity to buy a 1953 Mercedes 190 back before I bought my avatar in 1970 for $350.00. It was tempting, but I was afraid I wouldn’t be able to afford to repair and maintain the thing. As it was, I spent approximately $2200.00 over the course of three years maintaining/repairing/fixing up my Chevy! Oh well, it kept me too broke to get into trouble while I was in the USAF!

  • avatar

    Anyone who ever owned a classic car knows the bottomless pit of finance these cars reside in. Love is what keeps them together. I think I’ll keep buying Ford Stock and short GM right now.

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