From this weekend's Barron's: Forks in the Road The collectible-car market is gearing up again and going in new directions
By Christian Garvin
When John Hoffman was 17 and in his senior year of high school in Bay
Shore, Long Island, he wanted three things: to date the girl who was head of
the cheerleading squad, to stay out of the draft and, most of all, to own a
1963 Chevrolet Corvette hardtop. Now a 46-year-old marketing executive at
General Electric, Hoffman is still pursuing one of those dreams. No, he's not
hunting for the E-mail address of the pretty cheerleader who made his heart
ache. Instead, he's focused on another beauty, a mint-condition '63
split-window 'Vette that underwent frame-off restoration and cost him
$28,000 -- around six times what it cost brand-new.
The Sting Ray's fuel-injected
327 cubic-inch V-8 generates
360 horsepower, propelling the
35-year-old car to 60 m.p.h. in
a still breathtaking 5.9 seconds.
It carries Hoffman, who lives in
Santa Barbara, California, to his
office twice a week in a style to
which he's finally grown accustomed.
The GE marketer represents a rapidly growing trend in the collectible
automobile market. He's buying not on speculation, not on what he reads will
be the next collectible must-have and, most importantly, not to have a garage
showpiece that never sees the light of day. He's buying something he loves to
drive. "For me, the choice was simple," he says. "I always knew what I
wanted; it just took awhile for the means to catch up with the desire."
Many aging Baby Boomers covet the dream cars
of their youth, making autos that were desirable
to teenagers from 1960 through 1975 some of the most attractive for
long-term investment today. These Boomers, whose disposable income is
rising as they enter their peak earning years, are driving an upswing -- and a
significant change -- in a classic-car market that went into a free fall after the
heady 'Eighties.
From 1985 to 1990, prices
reached unheard-of levels as
buyers treated vintage
automobiles like rolling works of
art. As prices began to soar, so
did the status of owning an
exotic or collectible vehicle.
Inexperienced buyers rushed in,
purchasing on speculation, often with little or no real concept of what
constituted a classic. New and undistinguished production Ferraris began
trading at twice their sticker prices, right off the showroom floor. Old exotics
doubled or even tripled in less than two years, as suddenly anything with a
Porsche or Ferrari moniker seemed more attractive than a new Internet stock
trading at 10 3/8 might seem today.
Many people, myself included, bought models they thought were in excellent
condition, based on sellers' testimonials like "Grandma drove this to church on
Sundays, then we put it in the garage for 10 years." A year later and
thousands of dollars poorer, some buyers were haunted by one question:
How many hundreds of miles from her home was Grandma's church?
In short, the tyros learned some costly lessons: First, only a select group of
investors in old cars ever see any actual profits. Second, classic automobiles
can be bottomless money pits; how many other "investments" require
payments for restoration, maintenance, storage and insurance? Third, the best
reason for buying an old car is because you find it irresistible and are
intoxicated by the thought of driving it, not because you view it as a status
symbol or a vehicle for making big bucks.
The sobering reality is that many investors who entered the fickle world of
collectible automobiles in the 'Eighties took a big hit. That's why the early
'Nineties turned into a buyer's market, with many collectors accepting pennies
on the dollar for their vehicles.
Today the market has stabilized,
with demand having recovered,
although not to the level
apparent in the 'Eighties. And
collectors' focus has shifted
markedly.
There has been a noticeable
movement away from the exotics that led the market in the past decade.
While these wonderful machines are still prized for their performance, the cost
of ownership and restoration has kept prices relatively static.
The real growth -- especially among first-time buyers -- has been in younger,
less glamorous vehicles like American muscle cars, which often are true
bargains. "People are smarter now," says Bill Thorp, owner of a classic-car
restoration shop in Santa Barbara. "Buyers know what they want and are
willing to pay for it, but they're more down-to-earth about it. Gone are the
people looking to make a quick buck. Today, people want a car to keep,
something from their youth or something rare."
Newer cars and those that possess an unusual or unique trait or story or
previously had a celebrity owner have enjoyed a surge in popularity.
In August, the annual Pebble Beach Concours d'Elegance show and auction
provided numerous examples of this trend. While there was no shortage of
Maseratis or Lamborghinis, the largest expanse of floor space was devoted to
classics from the latter half of the century, primarily American iron or racing
cars.
A 1966 Ford Thunderbird
convertible fetched $15,500,
while a 1966 Chrysler Imperial
was considered a steal at
$8,700. As these prices
demonstrate, you don't have to
be rich to be an automobile
collector. Many of the newer
collectibles are very accessible to the buyer of moderately ample means.
Another plus: Classic American cars are fairly simple to work on, and parts
are readily available through catalogues and clubs. And the relatively low
purchase prices protect buyers from getting really burned, even if the vehicles
don't appreciate substantially.
Dan Berggdorf, publisher of Collector, a magazine for automotive investors,
predicts that the number of people entering the market will continue to climb
as the Baby Boomers mature and retirement gives them more free time to
tinker with hobbies.
For those considering entering the world of collectibles, the auction market
presents one of the best routes to find vehicles at reasonable prices and to
meet fellow enthusiasts.
Numerous local auctions take place around the country, with the big players
turning up for mega events like the annual Barrett-Jackson Auction in Arizona.
This three-day televised extravaganza is a Mecca for the collectible-car set,
featuring a full range of vehicles. Its 28th annual installment will take place in
Scottsdale, January 20-24, 1999. (The auction's Website is
www.barrett-jackson.com).
When looking for a vehicle
with the potential to
appreciate, buyers should do
what many buy-and-hold
investors do in the stock
market: seek out sectors that
are undervalued.
For example, British roadsters from legendary makes like Triumph, MG, and
Austin-Healy are all gaining in value, but still offer fertile hunting ground for
bargain hunters (in part because their equally legendary unreliability deters
some potential purchasers). Good buys also can be detected among
American muscle cars, like old Pontiac GTOs and early-model Camaros,
which will always have a market, as long as there are shade-tree mechanics
and homecoming games. And, perhaps most surprisingly, certain trucks and
vans from the 'Fifties and 'Sixties -- vehicles that enthusiasts would have
sneered at a decade ago -- have also gained collectible status, proving that
the classic-car market is constantly readjusting to the whims of the
contemporary buyer.
One big caveat: Investors with
little mechanical expertise should
bring along someone who does
have the necessary knowledge.
In any event, purchase a vehicle
in the best possible condition;
restoration costs can be frightful.
"People should buy a car they
can enjoy and that they can handle. Nobody wants to spend more time in the
garage than on the road," advises Bill Thorp.
Although lots of people have made nice profits in the collectible-car market,
success certainly isn't a given. That's why the bottom line should be pleasure,
not profits. Hey, if you couldn't have the cheerleader of your dreams, at least
you can have the car that you would have taken her for a spin in.
CHRISTIAN GARVIN writes frequently on investing in collectible automobiles.
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