Should a car be an investment?

July 31, 2016

 

My uncle used to co-own a mid-80′s Porsche 911 Turbo (930 for short). It was pristine, with low mileage and the most beautiful shade of deep, metallic brown adorning its curves. I got a couple rides in it right around the time I went through the strange, dark period known as puberty. I didn’t quite know how special the car was at the time, but I was sad to hear when my uncle and his fellow owner sold the car for somewhere around $35,000.

 

As any automotive aficionado is certainly aware, that figure is simply unheard of in today’s burgeoning Porsche market. A brief browse through the 930s on Ebay has higher mileage examples at a minimum of about $70,000, with nicer ones covering most of the $100,000 spectrum and the 4-digit-mileage peaches soaring into “are you shitting me” territory. 

 

(Above: this exquisite, sub-10,000-mile 930 can be yours for the low, low price of $309,000!)

 

Let’s assume the brown 930 is worth $150,000 on today’s market. If you acquired the car 8 years ago for $35,000, it would have appreciated year over year at a rate of nearly 20% and quadrupled in value. That’s an outstanding figure as far as investments go. Wherever my uncle’s 930 lives today, it’s done quite well for itself. 

 

Look elsewhere in the world of classic cars, and you’ll find a similar story. It seems that every desirable classic is getting pricier by the day. Now more than ever, the right cars could serve as viable investment vehicles (pun very much intended). 

 

Should they? 

 

Originally, I titled this post “Can A Car Be An Investment?” I changed it because the answer is so obviously yes. If you’re an investor getting 20% returns on your money every year, you’re probably good enough to manage other people’s money. Even 10% yearly returns are admirable. With the classic market behaving the way it is, 10% yearly appreciation and greater is well within reach. Or perhaps I should say grater, because of all the cheese you’ll make. No? Just me? Okay, moving along then. 

 

Of course, classic car ownership transcends mere financial figures. You are the steward of something truly special. Every time you step out into the garage, you’re greeted by a piece of automotive history. Every time you drive the car, it treats you to an experience few things can match. Somehow, it seems highly unlikely that you’ll get those sorts of returns from a mutual fund.

 

(Above: Acura NSXs have seen recent appreciation too. This all-original 1996 example opens at $60,000.) 

 

However, the risks of standard investment vehicles are quite different than those of literal investment vehicles. Your mutual fund can’t be rear-ended on a Sunday cruise. Conniving thieves won’t steal your stock portfolio. And your treasury bond won’t suddenly spin a crank bearing and need $10,000 engine-out service. 

 

That’s another thing about treating a classic car like an investment—operating costs. Classic cars aren’t free rides to big returns. You’ve got to keep gas in the thing, change its oil, and perform basic upkeep. There’s also the risk of something failing due to age, in which case your investment value might start flirting dangerously with the red. 

 

From a strictly financial standpoint, all risks considered, the right cars can serve as excellent investments. Classic Porsches and Ferraris are especially enjoying handsome appreciation. With a clean car, a healthy amount of discipline, and a trusty mechanic, the shrewd classic buyer could stand to see big payoffs down the road. 

 

(Above: Even the De Tomaso Pantera is appreciating. Several years ago, these cars were well within the $30,000 - $50,000 range. This unmolested 1973 model now commands $90,000.)

 

But that’s not the question I'm dealing with here. The real question remains: should a car be an investment?

 

In order to have your classic car of choice appreciate in value, you just can’t afford to drive it very much. Keeping the car off the road diminishes the risk of accidents and breakdowns, and investors love diminished risk. Perhaps more importantly, you’re keeping the mileage down. Cue the rabid mob of enthusiasts who think you’re a soulless bastard. Cars are for driving, they’d argue. What’s the point of owning a timeless classic if it’s imprisoned in a garage? 

 

We now reach the impasse of experiential value vs. financial value. Let’s say I purchase a first-rate Ferrari 308 for a good price—in the current market, that looks to be about $70,000. If I treat the car as an investment, the mileage stays down and the value goes up. If I treat the car like the Italian beauty that it is and drive it uninhibited, the value will probably still increase, but to a lesser extent. 

 

(Above: A mint 308 GTSi from 1982. Rosso Corsa, tan leather, and 23,000 miles. $73,000 puts you in the driver’s seat.)

 

So which practice is worth more? Like any middling philosopher, I answer that question with more questions. Can you really put a value on the experience of driving classic machinery? How can you financially measure the tactile, mechanical feedback from the steering, the smell and feel of decades-old leather, or the symphony of a timeless engine?

 

Not to be forgotten is the simple spirituality of the issue. It gets back to the “cars are meant to be driven” argument. After all, it’s literally what they’re built to do. It would pain the hearts of many to know that historic cars were being denied the open road for the sole purpose of financial gain. If cars had souls, those cars would not have happy ones. Their owners probably wouldn’t have souls to begin with. 

 

Occupying the no-man’s land between these opposing viewpoints are the preservationists and the practically minded. The preservationists keep the miles off their classics for—you guessed it—preservation’s sake. The practically minded recognize that their classic cars simply aren’t suited to ordinary and/or daily usage. Both are fair arguments in their own right, as long as they’re tempered with healthy doses of driving. 

 

(Above: This ‘84 Ferrari Mondial QV currently sits at just a tick over $20,000. Absurd that the price to own a mid-engine Italian V8 is so relatively cheap.)

 

So I close with the following opinion: cars should not be strict investments. It would be an absolute shame to become the caretaker of a classic car and hardly drive the thing. I am firmly in the “cars are for driving” camp, along with some weird old guy named Jay Leno, who staunchly refuses to treat any of his invaluable machines as investments. 

 

My father and I have been discussing the possibility of investing in a classic car. We were sorely tempted by a Mondial QV like the one above, although our target was a Euro-spec model with 35,000 miles and Rosso Corsa paint. It sold for the shockingly low price of $23,100. The Mondial seems to be completely overlooked by classic buyers, and we were banking on the fact that the price will probably rise in the coming years. But in the end, we passed it up, knowing we could never drive it the way we wanted if it were truly an investment. I’m glad we did. 

 

(Author's note 11/11/16: When I first wrote this piece, I was totally unaware of the really, really high-end stuff. There's a 1954 Ferrari 500 Mondial in our shop right now that's easily worth $6 - $7 million. In that sort of territory, you're nearly guaranteed to make money when you sell, no matter what you do with the car. The Mondial raced the Mille Miglia in period, and the current owner has driven it several times in the race's modern revival. Good man.) 

 

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