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Cars as Investments

By Bob Earls

”The Collector Car Investment Fantasy”

Let’s cut right to the heart of the matter: Don’t let the fantasy world of celebrity automobile auctions lull you into a dream of windfall profits. Yes, there are those who make a killing at certain auctions. Yes, there are those who actually make a profit if they keep a car long enough. But remember that for every 1970 Chevelle SS, LS-6, numbers matching, rotisserie restored car that brings $200,000 at auction, there are 200 that are lucky if they can recoup restoration costs. Media coverage focuses on the few cars that command stratospheric prices, but if you look deeper most auctions are a buyer’s paradise!

Another factor in auction pricing is the quality of restoration and the provenance of rare models. Even seasoned professionals who search out cars as potential investments get fooled by fakes and skin-deep restorations. You can judge a car’s condition only by what you can see, and much of a car lives in darkness. There may be rust between panels, and paint that was not properly applied. An engine block may have stress cracks, or it just may have inferior parts inside. Old cars can be full of surprises just because they’re old. I’m not trying to scare you, but you just need to be aware of certain realities so you don’t get shocked into a major depression.

Prices in the collector car market really spiked in the late 1980s, with even some financial brokers recommending classic cars as a “can’t lose” investment. People were paying ridiculous prices for everything from 1959 Cadillac Eldorado convertibles (always a big favorite because of their icon status) to 300SL Gull Wing Mercedes-Benz. Virtually every Ferrari had a big run-up in value. People’s portfolios and their garages were stuffed full with very overpriced “classics”. Then a funny thing happened: the overinflated market completely collapsed, and people lost thousands or even hundreds of thousands of dollars overnight. I personally know of one guy who had a nice, desirable Ferrari he’d purchased years earlier for $14,000, and sold it in 1988 to a “consortium of buyers” for $750,000, only to buy it back two years later for $250,000!

I heard a rumor recently that the market is saturated with high-end muscle cars and that prices have peaked. I believe it. Trends come and go, and what’s hot today may not be by the time you finish your “investment restoration.” The problem is that as sale prices level off or even fall, the cost of restorations will continue to go up.

Don’t get sucked in by “Ratings”

Car collectors have established ratings and points designations to signify the condition of a car.

The “numbered” rating system uses categories 1 through 6. This system was created years ago by a publishing company that produced an old car price guide. They wanted a standard classification of vehicle condition so relative values could be determined. There are a couple of value guide publications on the market today and they are useful to get a rough idea of what a car’s value is based on a formula that takes into account recent auction prices or market trends. Sports Car Market magazine (www.sportscarmarket.com) has a set of price guides, online resources, and a monthly magazine devoted to this topic.

The “point” system is employed at most judged car shows and concours d’elegance. The points awarded a car are applicable only to the show in which it was judged. A 100-point car judged at a local high school show is not the same as Pebble Beach or even a local, established concours. A 100-point scale is most frequently applied, although some marque-specific concours utilize a 1000-point scale to further refine the demerits for the smallest of flaws. Points are (usually) deducted based on predetermined criteria. A 95-point car at one meet could score 90 at another based on whatever subjective criteria is applied.

Here’s how it works, in theory:

A #1 or 100-point car is absolutely perfect in every detail. It’s over-restored, has all OEM parts (no after-market parts on it), and is better than the day it rolled off the showroom floor. In a car show or Concours where 300 cars compete, maybe 10 will be judged 100 points. Such perfect cars are rarely, if ever, driven. If they’ve got much more than 1,000 miles on them since restoration, then they’ve lost that “new car smell and shine” and they’ve become “High #2” or 95 points.

#2 cars are as good as the day they came off the showroom floor.

Most “drivers” are #3, which means that they’re a good, complete, drivable car that needs very little either mechanically or cosmetically, but they show the signs of use.

A #4 car is fairly complete, but needs serious attention in one or more areas. Perhaps the paint is faded or scratched, or the interior shows significant wear. There may be extensive non-original parts or modifications.

A #5 is a beater, and #6 is primarily a parts car.

Depending on who evaluated the car, these ratings are not necessarily an accurate indicator. In fact, they are rarely unbiased. The first fact is that there are very, very few #1 condition or 100-point cars out there for sale. Those that are truly rare and in top shape typically sell at auction with high reserve prices through a small number of elite outlets.

”Fully restored”. What does that mean?

Unfortunately, all too often what this means is that someone is asking top dollar for a mediocre paint job, a bottle of Armor-All splashed on the interior and some shiny, new, reproduction mag-style wheels. It should mean that the old paint was stripped down to bare metal, any body damage was properly repaired and a paint job at least equal to the original was applied. It should also include all new weatherstripping, proper interior restoration and disassembly of all mechanical components with any worn pieces replaced.


When you evaluate a “restored” car, ask questions. Who did the work? What exactly was done? Are there any photos or receipts to back up the claims? You don’t have to be confrontational about it, but it’s your money and you have a right to know if you are, in fact, getting what’s been advertised. ENDHINT

The “Numbers-Matching” Game

When parts are made for new cars they have part numbers assigned to them. Some parts have a wide, general application, while others are very specific for a particular make and model. Major engine parts, alternators, distributors, carburetors, even window glass and spark plug wires have date codes. Many cast parts (engine block, crank, heads, manifolds, transmissions, etc.) also have casting numbers and date codes. All these numbers have a particular correlation to each other and in a numbers-matching car they should be correct.

Date codes should generally be within a few months of each other and never after the date the car was built. A car that isn’t numbers matching isn’t an inferior car, per se. It just isn’t, shall we say, perfect. If a car is represented as being “numbers matching”, and the asking price reflects it, do your research or hire someone who knows what they’re looking at. Sometimes the numbers can be forged or manipulated. While OEM parts are always judged highest in any concours, “numbers matching” is most significant to cars of the 50s and 60s, especially muscle cars. The difference in price between a numbers matching car and one that isn’t can be huge.

The Bottom Line on Classic Cars

I’ve always found it interesting that people will shell out $30,000 to buy a new car, which they basically use as an everyday commodity or tool, and are willing to accept the fact that it starts losing money the instant they drive it off the lot. Yet some collectors assume that just because they’ve bought an old car and done nothing to it, it should automatically be worth more a year later when they decide to sell it. Some can pull it off, some can’t. There are no guarantees when it comes to price/value/profit. A car is only worth what the buyer and seller agree it’s worth. I’ve always viewed an old car as therapy, and good therapy is rarely free.

Do your homework and buy the best example you can afford, but always buy a car that’s going to give you enjoyment -a car that will put a smile on your face. That’s the best payoff there is.

Dos and Don'ts
Thumb up  DO
  • Do your research or hire someone who knows what they’re looking at
  • Ask questions. Who did the work? What exactly was done? Are there any photos or receipts to back up the claims?
  • Buy with the idea that if everything goes to hell and you’re stuck with it, you’re OK with that
  • Remember, there are no guarantees when it comes to price/value/profit

Thumb down  DON’T
  • Don’t let the fantasy world of celebrity automobile auctions lull you into a dream of windfall profits
  • Don’t get sucked in by “Ratings”
  • Don’t do things like putting chrome wire wheels on a car that didn’t come with them, or painting the car red, except for the engine compartment, which is still dark green
The Popular Restorations Feature Car
Author photo

1946 Packard: A good investment?



“Cars as Investments” can mean substantially different things to different people.

Let’s start with a basic definition from Wikipedia:

Investment: the choice by the individual, after thorough analysis, to place or lend money in a vehicle (e.g. property, stock securities, bonds) that has sufficiently low risk and provides the possibility of generating returns over a period of time.

This is contrasted with:

Speculation: Placing or lending money in a vehicle that risks the loss of the principal sum or that has not been thoroughly analyzed.

From a strictly business perspective, buying a car that underperforms money in the bank is a bad investment. And a restoration professional must make more than bank interest to cover business overhead and to generate income. Today’s economy further complicates the picture: buying anything expensive is definitely speculation.

But what about the person who buys a moderately-priced collector car? Well, look at it this way: According to nadaguides.com, if you buy a $23,000 Chevy Impala LS and drive it 50,000 miles over a four-year period it will be worth less than half what you paid. If, on the other hand, you buy a $23,000 1960s Chevrolet in excellent condition it will undoubtedly be worth at least half what you paid and maybe much more than that. The fewer miles you drive the more dramatic the difference will be.

So, you don’t have to make money on a collector car for it to be a good investment. It may not appreciate, but if it is your daily driver it may depreciate less than a new car or even a modern used car.

Consider the definition of investment again. “Returns over a period of time” is the desired outcome. For most car buffs, collector cars generate “returns” that go beyond monetary gains. There’s the joy of having and driving a car you really like. And then there are the social benefits such as car club membership and friendly questions and comments from interested passersby. Many owners find puttering relaxing; they insist the money they spend would otherwise go to therapy.

So what about the Popular Restorations feature car? Has it been a good investment? In a word, yes. It has been a source of countless rewards and dozens of awards, and will likely keep its value for decades to come.



Sports Car Market & Corvette Market Magazines

By Jeff Zurschmeide

Paul Duchene, Executive Editor

PR: Tell me about cars as investments?

PD: It’s Quicksand, as we both know.

PR: What makes a good investment?

PD: Originality. One of the things that has happened in the last couple of years is that classic cars have entered the same realm as antiques. If you’re collecting guns and clocks and furniture, you don’t refinish them. That’s the first rule.

However, that being said, it’s important that there’s some measure of the passage of time that’s visible - that’s what makes it an antique. If you’ve got a ‘57 Pontiac with 14 miles on it and it’s sat in your garage all its life, it’s not a usable antique. It just belongs in a museum because every mile you drive it, it’s going to cost you money.

On the other hand, there was an Aston-Martin DB4 that was sold in Paris this year, and it was one-family, totally documented, and only about 50,000 miles as I recall it. Every bill and everything that had ever happened to it was noted. That car went for about double what anyone expected.

That’s the whole thing. If you’re looking at something that’s a historical artifact, then you have to be able to document where it was and who owned it. It’s to the point with Corvettes that you’re almost better selling something scruffy and old with absolute documentation than something that’s restored with no documentation. That scares everyone to death, because you don’t know that it has the equipment it was made with.

PR: What makes a bad investment?

PD: A bad investment is something you buy because you think you’ll make money on it. Something you don’t care about particularly, but you think you can’t pass it up. Bad idea. Whatever you buy, buy it with the idea that if everything goes to hell and you’re stuck with it, you’re OK with that. So only buy what you like.

If you always wanted a ‘57 Chevy when you were growing up, but you could never find one because by that point everyone was building them, and then you find a four door hardtop in robin’s egg blue and teal, and maybe it has an automatic and base engine. Maybe it’s not even particularly fancy, but you get it, and then it’s your car. If you ever talk to owners at shows or even on the street, and you ask if they’d be interested in selling their cars, many times they’ll look at you open-faced and say “why would I do that? This is my car.”

PR: How often do people lose money on investment cars? Half the time?

PD: Only half? I bought a Jensen-Healey about three years ago. It was a 30,000 mile car, all black, factory hardtop, and I knew the history. I didn’t particularly like it much, but it was a reasonable price. What happened was that I was stuck with this car. It’s hard to sell something with much enthusiasm if you don’t like it. I ended up doing a complete brake job on it, then I slipped and fell on it and dented the door and I had to fix that. I was involved in it for the wrong reasons. All in all, that’s a classic example of what NOT to buy.

What should people think when they see huge prices on cars at auctions, like the Hemi-Cudas that sold for $700,000?

That was in 2006, and the same car will sell for $175,000 today. There are always people who have completely unrealistic expectations of what things are worth.

What should people not do when they want to sell a classic car?

The basic mistakes with a car are to do things like putting chrome wire wheels on a car that didn’t come with them, or painting the car red, except for the engine compartment, which is still dark green. As with any antique, classic cars are about provenance and accuracy. Basically that’s it.

What’s the bottom line on collector cars as investments?

It’s not about common sense. It’s not rational. Buying cars is about passion. Keith Martin, the founder and publisher of Sports Car Market, once said that the main job of any collector car is to be parked in the garage while you stand there with your friends and a glass of wine and admire it.

Sometimes the funnest day is when you pull it out of the garage on a sunny spring day to wash the dust off and you can rediscover the car. Because if you then decide to drive it to the coast, you might find that the thermostat is stuck or the fuel filter’s clogged, and that’s less fun.

Click on any item below for more details at Amazon.com

Matt Joseph
Collector Car Restoration Bible: Practical Techniques for Professional Results
Krause Publications, Paperback, 2005-10-14

This book covers it all, from buying a restorable car to the finishing touches. And in between, it touches on every part of the car, from sheet metal repair to engine internals. If you were to have just one book as a guide, this would be that book. The book is photo-rich and provides both procedural details and collected wisdom from experienced restorers.

Tom Benford
The Complete Idiot's Guide to Restoring Collector Cars
Alpha, Paperback, 2004-08-03
The first 150 pages of this book are dedicated to the process of finding and deciding upon a restoration project and determining your restoration strategy. This part is covered in detail, and covered very well. The last 50 pages or so cover what to do with your car after the restoration is done, which leaves just over 100 pages to cover the actual work. For example, the chapter on engines assumes that the basic mill is in good shape, and simply covers tuning, carb adjustment, and freshening the engine bay. This is not a step by step mechanical manual - but it offers some of the best coverage on every other aspect of restoration.

Jim Richardson
Classic Car Restorer's Handbook: Restoration Tips and Techniques for Owners and Restorers of Classic and Collectible Automobiles
HP Trade, Paperback, 1994-11-01

This book covers a lot of ground in comparatively few pages, and while it has step-by-step procedures, the steps are often large. This book is a good choice if you want to understand the restoration process and all the pieces you’ll touch. However, it’s not sufficient to be your main guide to the restoration process.

L. Porter
The Classic Car Restoration Guide: The Complete Illustrated Step-by-Step Manual
Haynes Publishing, Hardcover, 1994-04-30
This book offers some excellent pre-purchase checklists, and spends much of its space on bodywork and interior restoration, but rather less on mechanical items. The book was written in Britain for a British audience, so some elements may be less applicable to an American restoration, such as the section on getting a car through a Ministry of Transportation inspection. The book’s focus is almost exclusively on classic British cars.

Burt Mills
Auto Restoration: From Junker to Jewel
Motorbooks Intl, Paperback, 1980-06

This book is a nice overview of the process, but does not go into great detail about restoration procedures. A good choice if you’re wondering what is involved in a restoration and want to know more before making a commitment.

Greg Donahue
How to Restore Your Muscle Car
Motorbooks, Paperback, 2005-11-07

This book covers all aspects of restoration in detail, with a focus on the special issues found in 1960s and 70s muscle cars. From car selection through engine and interior restoration, this book is full of photos, illustrations, and step by step procedures. Examples are given from all domestic automakers. Reviews have been generally positive, for example (from AutoWeek): “With clean vintage muscle cars skyrocketing in price, this second edition has good timing, providing updates on parts sources and restoration techniques. We didn’t use the book to restore a muscle car, but we found it clear and concise, with user-friendly disassembly diagrams and 1,300-plus step-by-step photos, from choosing tools and which muscle car to restore, to completing the restoration.”

Tom Brownell
How to Restore Your Collector Car
Motorbooks, Paperback, 1999-12-24

This book has a great deal of information on selecting a potential project car and setting up the workshop, plus a lot of detail on cleaning, stripping, blasting, derusting, bodywork and trim restoration, but comparatively less (just 1 chapter) on engine and mechanical restoration and 1 chapter on brakes. The book includes many nice color photos, however, and would be a good addition to a restoration library.

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