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					                                                                                                             beyond money

investing in
        vintage cars
                                             Stroll around moSt                        full classic as “fine or unusual motor cars which were built between
                                             parking lots these days and it is         and including the years 1925 to 1948.” Generally, a classic was
                                             usually hard to spot a car with           high-priced when new and was built in limited quantities. Car
                                             a distinctive look. But there was         makes included Cadillac, Packard, Auburn, Pierce-Arrow, Bugatti
                                             a time when cars had sharply              and many others. Following the parameters set by the club, there
                                             different designs and even multi-         were 1.4 million classic cars produced in the U.S. during those 23
                                             color paint jobs—what some term           years, which is quite small considering that U.S. factories manufac-
                                             rolling works of art. Nostalgia for       tured 61.5 million passenger cars in that same period.2
                                             those days is one of the drivers for
                                                                                       Purchasing a car within a certain group such as vintage racers,
                                             renewed interest in vintage and
                                                                                       requires specialized knowledge. Thanks to races such as the
collectible cars. Attendance is on the increase at old car shows and
                                                                                       annual Monterey Historic Automobile Races and the Lime Rock
auctions held throughout the year from the Pacific Coast to upstate
                                                                                       Fall Festival, where owners of race cars with verifiable histories
New York and numerous points in between.
                                                                                       can compete, the values of selected 1930s-to-1960s-era race cars
Prices paid at auction for some of the most desirable cars have                        have increased dramatically. However, buying these cars brings
climbed sharply in the past few months. This past May a rare 1962                      additional risks: Vintage race cars often have complex engines and
race car, a Ferrari that was driven to victory at the famous 24 hours of               suspensions, are expensive to maintain and require race insurance.
Le Mans race, sold for $9.3 million. The deal ranks among the top five
                                                                                       When assessing value in vintage race cars or other types of antique
public sales, when adjusted for inflation. This same car had sold for $6
                                                                                       vehicles, investors will investigate its rarity and provenance to deter-
million at auction just four years ago.1
                                                                                       mine its historical significance. For example, a car that was piloted to
One of the main reasons cited by experts for the upswing in vintage                    victory by a famous driver(s) at the 24 hours of Le Mans, can com-
autos’ popularity is the desire among many wealthy baby boomers                        mand a higher asking price than one that failed to finish the race.
to purchase the high-performance or luxury cars that were out
                                                                                       After investors decide which type of car, make and from which era
of reach when they were young in the 1960s and early 1970s. Of
                                                                                       they would like to purchase, experts advise thoroughly researching
special interest to these collectors is a group of cars referred to as
                                                                                       the choice via automobile magazines, reference books and car clubs
“muscle cars.” These U.S. mid-sized cars with big engines such as the
                                                                                       to determine if certain years or models are more rare, and thus
Plymouth Hemi Cuda (with a hemispherical-combustion-chamber V8
                                                                                       more valuable, than others.
engine created by Chrysler in 1951) and the Pontiac GTO, were built
before concerns about excessive gasoline use and exhaust emissions                     If the car you are considering is located in another city, one option
led to stricter federal regulations.                                                   is hiring a certified professional appraiser to evaluate it. An appraiser
                                                                                       will provide a detailed report containing the value recommendation.
Muscle cars were celebrated in pop songs, TV shows and movies. At
                                                                                       Certified car appraisers often act as judges at car shows and grade a
a recent auction, a rare convertible muscle car sold for a seven-figure
                                                                                       car on a standard 100-point scale.
price. That price was unusually high, but desirable and well-restored
cars from that era routinely earn five-figure and even six-figure prices
                                                                                       methods for purchasing cars
at auction.
                                                                                       A recent survey of 10,000 classic car owners by Hagerty Insurance
                                                                                       Agency, the leading U.S. insurance agency for collector vehicles
defining collectible cars
                                                                                       and boats and host to the largest network of collector car owners,
In the car collecting world, words such as classic and vintage usu-
                                                                                       found that 35% of respondents chose to purchase their car from
ally refer to certain eras. Vintage is used to describe cars built
                                                                                       a local contact or friend, 35% bought it online, 16% acquired it
between 1919 and 1930. The Classic Car Club of America defines a
                                                                                       through a print publication, 9% from a dealer and 2% at a live auc-
1   The Wall Street Journal, May 21, 2007                                              tion.3 Auctions generally charge both buyers and sellers a fee,
2 Quoted with permission from the Classic Car Club of America.   usually about 8% of the sales price.
3 Quoted with permission from Hagerty Insurance Agency.

Though auctions represent a small fraction of collectible car sales,                    Another cautionary note about investing in collectible cars: An auto
collectors closely watch the results of auctions for an indicator of                    investment craze in the 1980s led to some of highest prices ever
their vehicle’s worth. However, auction sale prices tend to be higher                   paid for rare, vintage cars (even adjusted for inflation). For example,
than the overall market. The cars on the auction block usually rep-                     a rare 1931 French Bugatti sold for close to $9.8 million (adjusted
resent the most pristine of each category and the excitement of                         for inflation), at auction in late 1987 at the height of that era. When
competitive bidding (particularly when televised) can lead to inflated                  the car investment bubble burst in 1989, prices for numerous vin-
sales. Auctions can be useful in forecasting overall market trends, but                 tage cars dropped dramatically.
they are not as reliable for estimating average vehicle values. A price
                                                                                        With that said, there are certain types of cars that are drawing a
guide or an appraisal is a usually the better method for this purpose.
                                                                                        great deal of interest from collectors these days and may have the
                                                                                        potential for further appreciation, according to vintage motorcar
Putting together a collection
                                                                                        experts. The types of cars that are now frequently in great demand
Most automotive experts say that it’s best to purchase a car that
                                                                                        besides the muscle cars include vintage hot rods, vintage race cars
you love and if it does appreciate in value over time that is just an
                                                                                        and certain British sports cars from the 1950s and 1960s such as
additional bonus of owning a beautiful machine.
                                                                                        the Austin-Healey 3000, MGB and Jaguar E-Type.
For those who are determined to assemble a garage of valuable
                                                                                        When searching for a car that will command top prices, investors
cars similar to a cellar of vintage wines, one investment strategy
                                                                                        must do quite a bit of due diligence, just as with any asset class. For
may be to purchase a focused or themed collection of one type of
                                                                                        example, in recent years collectors have bid up at auction the best
car or make, explains Mark Osborne, Head of the North American
                                                                                        and rarest examples of U.S. built muscle cars from the late 1960s
Motor Car division at auction house Bonham & Butterfields.
                                                                                        and early 1970s, with special factory add-ons or rare features, into
Osborne explains that the more focused the theme, the greater the
                                                                                        the high-five to low-six figures. But to command those prices, the
interest and bids—generally speaking—when the collection comes
                                                                                        cars must have complete and authentic documentation, including
to market. For example, Bonhams & Butterfields just auctioned a
                                                                                        original factory options and accessories.
collection of Ford cars and trucks from the 1930s and 1940s, which
drew substantial interest because the trucks were immaculately                          Some unscrupulous people have tried to make average cars more
restored to award-winning standards and one had a rare six-cylinder                     valuable by adding on after-market parts, such as trying to stealthily
engine (rather than the more typical eight-cylinder).4                                  convert a 1960s Ford Mustang into a much more valuable Shelby
                                                                                        version. Investors must insist on seeing the car’s vehicle identifica-
risks of car collecting                                                                 tion number (VIN), the factory build sheet (the company’s original
Unlike a portfolio of mainly conventional investments, a collection                     documentation of what features and accessories were installed at
of vintage automobiles can be quite a bit of fun and the cars can                       the plant) and confirm that the car’s current drivetrain (engine and
be taken out for a spin. However, stocks and bonds usually do not                       transmission) is original before completing a sale. McKeel Hagerty,
require regular maintenance, insurance and a climate-controlled                         one of the principals of Hagerty Insurance Agency, explains that
garage. Some of these cars are too valuable to drive, but many                          the authentic motor in a car often makes the difference between a
collectors, such as famous vintage car aficionado and TV host Jay                       muscle car that is worth $50,000 or $500,000.5
Leno, throw caution to the wind and enjoy tooling around town
in their prized machines. Most classic cars would not be an ideal                       alternative to purchasing a classic car
choice for daily commuting either because they generally lack air                       Since purchasing and maintaining rare automobiles can be quite
bags, air conditioning or state-of-the art brakes.                                      time consuming and expensive, some entrepreneurs have begun
                                                                                        offering auto clubs that allow members to drive many rare, vintage
                                                                                        and even new cars for a few weeks at a time. One club limits mem-
4   Mark Osborne, Head of the North American Motor Car division at auction house
    Bonham & Butterfields, was quoted with permission from Bonham & Butterfields.
                                                                                        bership to 500 members in each of its locations and charges an
5   Interview with Mr. Hagerty. Quoted with permission from Hagerty Insurance Agency.   annual fee of $7,000.


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