It's not surprising that folks on this forum are skeptical of classic cars as an investment. The inherent risk and carrying costs make them far less preferable than mutual funds. However, they are also a lot more fun than mutual funds, so it is not unreasonable to allocate a (very) small portion of your portfolio to a classic car, provided you follow a few rules.
- Don't do this for the sake of an investment as a primary goal. If you like cars, and would be buying a sports car, old truck, or other non-necessary transportation anyway, there are ways of directing your money into something that stands a chance of making you some money rather than just burning it up as a hobby. I bought a brand new Toyota MR2 Spyder in for $25K in 2002, the same year a friend bought a 1985 Ferrari Mondial for $22k. A couple years later, I sold my MR2 for $17.5k, and he sold his Ferrari for $22k. He paid $3k for maintenance and repairs, while I paid $7.5k in depreciation. That convinced me I could approach the hobby differently.
- Look for cars at the bottom of their depreciation curve. Generally speaking, new cars lose value every year until about 15 years or so. Then certain isolated examples start to rise again.
- Buy something you like. This is an illiquid investment, so you need to be able to weather market fluctutations and hold onto a car that may be relatively depressed in the classic market for a few years.
- You're much better off buying something with a highly recognizable name. Everyone knows Corvette, Mustang, Porsche, Jeep, etc., so your eventual selling market expands to the general population who "always wanted one of those", whereas a Lancia, Studebaker, etc. will generally limit you to the specific enthusiast market.
- If you have an opportunity to buy a limited production version of a model, go for it!
- You make money on the purchase. The lower your bar of entry, the higher your eventual profit.
- Compromise in certain areas. You may love yellow Ferraris and green Porsches, but a red Ferrari and a silver Porsche will sell for the right price a lot faster.
Now, do note that this info is coming from someone who has read car magazines, websites, etc. daily for the past 35 years. This is deep hobby and a passion for me, and I've admittedly only recently learned how to be more strategic in my purchases, which has yielded much better results when I sell than in the past. I don't consider what I do "investing" per se, so much as mitigating losses on an expensive hobby. If I wind up actually making money, I'm happily surprised. In most cases, it winds up being a push...but that means I was the custodian of a classic Porsche, Ferrari, Vespa, etc. for little to nothing for several years.
Again, I certain don't expect the LBYM crowd (of which I am admittedly not a member) to embrace any of this. I suspect my indulgences may have been influenced by my father, who was a lifelong car enthusiast, but always said, "I don't need that" when faced the decision of whether to actually pull the trigger on a sports car. "Not for me, not today, maybe one day." I see in retrospect that had he actually bought the Triumph Spitfire he lusted after, the several thousand dollars would have had minimal impact on his current eight figure portfolio...but who know? Maybe he feared it would have been a gateway drug...
