A Classic Downshift : Prices of Many Antique Cars Have Fallen Substantially Since Late ‘80s
In hard times, an investor’s fancy often turns to money-making opportunities other than financial instruments. But unlike a 65-year-old Chateau Margaux, a Bordeaux wine too expensive for most people to drink, you can actually have fun with a 1926 Rickenbacker roadster (built by World War I flying ace Eddie Rickenbacker, who later headed Eastern Airlines).
This is no place to put your individual retirement account, but if you’re thinking of investing in classic cars, people in the business have a few words of advice: Just like Impressionist paintings, the antique car market was bid up to unreasonable heights in the late 1980s and is now suffering a retrenchment. Prices of some exotic cars--such as Ferraris--are down perhaps 50% from their Reagan-era highs.
“All of a sudden, people woke up in the morning and their car was worth 20% less,” said Dave Brownell, editor of Hemmings Motor News and Special Interest Auto, two industry publications. “I think it caught a lot of people by surprise. The last guy to buy the Ferrari is hurting right now. Classic cars are certainly one of the victims of the recession.”
Salomon Bros. Asset Management, which surveys returns on collectibles and other investments, notes that financial assets usually do better in times of low inflation, political stability and economic policies that encourage savings and investment. Conversely, assets such as vintage cars and fine art do better during times of high inflation, political instability and policies that favor consumption.
But there is no hard and fast rule, and the exit of a big-spending group such as Japanese businessmen or Arab oil sheiks can quickly devastate a market.
In the case of classic cars, foreign investors poured into the American market in the late 1980s, taking advantage of the weak dollar to buy up flamboyantly styled land cruisers such as the 1959 Cadillac Eldorado convertible, with its mighty tail fins.
Faddish Americans and investors seeking an alternative after the 1987 stock market crash also drove up the classic car market.
“It was like Van Gogh paintings,” said Cameron McCrady, a spokesman for the Behring Auto Museum in Black Hawk, Calif. “It was a speculative investment bubble that had to come back to earth.”
The good news, experts say, is that vintage cars are more reasonable again, with prices comparable to five years ago.
“I think it’s a great time for people to take advantage of the swing, if you’ve got the cash and you’re willing to hold on for a while,” said Rick Cole, a top car auctioneer whose firm is in North Hollywood.
In the high-end market, “some of the greatest transactions that have ever been done in the classic car world are being done right now,” he said. “It’s the same type of people who are buying defunct corporations.”
If you like cars and have some extra money, Cole’s advice is: Study the classic car market just as you would the stock market. Educate yourself and buy a car because you like it and believe that it will appreciate, not because it’s trendy or exotic.
“The guys I’ve seen make out best over a period of time are those who study up and buy a car they like and also secondarily think it is a good investment,” Brownell said.
Paul Schinnerer of Long Beach is typical of those who started collecting for the sheer love of cars and today sits on a nest egg. In 1950, he bought a beat-up 1930 Cadillac from his brother for $150. Over the years he painstakingly restored it into the two-tone maroon 16-cylinder convertible phaeton that he prizes today. He hesitates to put a value on his vehicle but says similar ones have sold for up to $500,000.
Schinnerer’s vehicle isn’t for sale, though. “I kind of like it after all these years.”
Of course, classic cars tend to require more maintenance than your average middle-of-the-road mutual fund. But experts say antique cars, once restored, cost less to maintain than the car you drive to work each day.
And once you’ve bought your cream puff--or invested a small fortune for restoration--you can join the legions of vintage car owners who treat their vehicles like a garage full of eggs.
“If you go to some of these shows, the people are really twitchy,” said Tom Dukes, an auto analyst at J. D. Power & Associates, an Agoura Hills market research firm. “If you come by, and you have a big Western belt buckle on and you look like you’re going to lean over their car, they practically go ballistic.”
Brownell said the classic car market for vehicles under $50,000 has also started “showing a few feeble signs of life.” He predicted that appreciation won’t be go-go in the 1990s but incremental, which is the way things went until the late 1980s.
McCrady of the Behring Auto Museum, which displays one of six Bugati Royales ever built--the 1931 Berline de Voyage--said the museum has seen a surge of visitors and interest this year.
“There’s no question amateurs are getting involved in restoration and there are more affordable car clubs active today--750 in California alone, most of them representing collector car marks,” he said.
McCrady and other experts say that, much like a Rembrandt, some of the big Mercedes and Bugatis--classics in the truest sense--have held their value despite the topsy-turvy car market.
“If you’re sitting with some nice classic Packards or a Cadillac V-16, you’re probably not hurting. You may not have people beating down your door, but you don’t have a 40% to 50% decrease in value like some of these high fliers had,” Brownell said.
Experts say exotic cars have taken the biggest hit. Brownell said he tried to buy an Aston Martin DB4 coupe about five years ago for $25,000. As he pulled his money together, the price jumped to $30,000.
It was quickly bought for $35,000 by an investor who shipped it to England and sold it on the dock for $70,000--all within three weeks. Today, Brownell said, he could probably buy the same car for $30,000.
“People got sidetracked to what car collecting is all about,” he said.
Perhaps that’s because car collecting, if done properly, can still be lucrative. Consider the 1968 L-88 Corvette, of which only a couple hundred were made, said Matt de Lorenzo, editor of Auto Week magazine. It sold for $6,500 new--about $2,000 more than a four-door Chevrolet Impala. At the peak auto frenzy in the late 1980s, the L-88 fetched about $100,000. Today it’s down to $67,000.
The collecting craze has even hit such unglamorous items as military tanks. The Wall Street Journal reported last month that war veterans, Washington lobbyists and just plain folks are buying and restoring vintage tanks--including a Nazi tank that was recently offered for $145,000 and drew five serious offers.
Can you buy a contemporary car today that will become a classic in the future? It depends on the rarity, desirability, curiosity value and a certain ineffable something that is hard to predict.