With the values of many collector cars now outperforming most indexes, even people who have no interest in these cars are asking me which ones will go up in value, by how much, and how quickly? I tell them that I really don’t know. While it is true that I don’t know, I do have my hunches. I like to think that my opinions are based on more than just guesswork. Much the same way that a stock analyst does their research, I do mine. I track the historic values of certain cars, and I look for other indicators that a particular car might be poised for a significant increase in value. Sometimes I’m right, and sometimes I’m wrong. But much like a casino, I only have to be right 51% of the time, and so far I’ve done better than that.
While I’m not quite willing to give away my secret sauce for picking cars that I believe will appreciate in value, I am willing to share some of the misconceptions that I encounter regularly.
The first misconception is that there are general rules that apply to all collector cars, and that these rules have an effect on the value of all individual collector cars. For every rule that someone thinks is carved in stone, there’s another rule that’s carved in stone…but with a completely different outcome. For example: “Absence makes the heart grow fonder”…and “Out of sight, out of mind.” Well, which one is it?
The second misconception is that rarity is the most important contributor not only to a collector cars’ present value, but its future value as well. This is not the case. There’s an old saying in the hobby that “Rare means that no one wanted it then, and no one wants it now.” And for the vast majority of collector cars, that’s the case. When you think about all of the years, makes, and models of cars that have been produced, many are deemed collectible simply by virtue of the fact that they exist. A very small fraction of all of these cars are both rare and desirable, which translates into value, both present and future.
The third misconception is that a collector car will be worth a lot of money just because someone has invested a lot of money in the car. This could not be farther from the truth. There is a relationship between the amount of money invested in a car, and the cars’ value. But it is not a direct relationship. The best that can be said is that the more you invest, the more the car will be worth. Sometimes every dollar you invest will return a dollar at sales time, and sometimes even more. But in the vast majority of cases, you will recoup only a fraction of your investment at sales time.
The subject of last weeks column, the 1970 W-30 442, will ultimately end up costing about $80,000 for the restoration. Factoring in the cost of the car, the owner could probably recoup her entire investment if she were to sell the car upon completion. That’s because that is what the car is worth. Not because of how much money she invested.
At the other end of the spectrum is a 1971 Corvette Coupe that I recently sold. Yes, it was a matching numbers big block, it had been restored to concours quality, and it had well over $100,000 in receipts for the restoration from a well known Corvette specialist, not including the cost of the car. It sold for $30,000. The reason for this is that for just a little more money, buyers can begin to look at comparable Corvette convertibles instead of coupes. So, in today’s dollars, no matter how much is invested, this is all the money a coupe will bring.
The final misconception is that condition is the most important arbiter of a cars’ desirability and future value. That might have been the case in the past, but it is not any more. Sophisticated buyers look at the “whole package.” In fact, I don’t think that it would be a stretch to say that the cars’ history and documentation are now the most important contributors to value. Many collectors that I know will not even entertain the purchase of a collector car unless it is has great provenance. A car can be painted. An engine can be rebuilt, an interior can be re-upholstered. But a history, including documentation, cannot be created. At least not legally.
For example, the 1971 Corvette that I mentioned earlier could easily have been worth 50% more than it sold for had it been in very good, un-restored, original condition, with original documentation and a known history. That would be true even with a few nicks and scratches, and other minor wear and tear.
So if you want to know which collector cars are likely to go up significantly in value, look for those that have great provenance, are as original as possible, are rare, and are desirable. You only need to be right 51% of the time.