DETROIT -- Classic cars may be a joy to show off at events such as at this weekend's 20th annual Woodward Dream Cruise here, but as investment vehicles, they involve unique costs (including heated garages in some cases) and risks (your muscle car could lose muscle after a financial meltdown).
For every story of someone who made $20,000 selling a 1930s hot rod, another story puts a dent into get-rich-quick dreams.
Take that 1958 Cadillac Eldorado Biarritz convertible that accountant James Jenkins bought at auction for $27,500 in the late 1990s. He put an additional $11,000 into that car to refurbish it.
"I always loved those old '50s cars. That's what the super-rich guys are driving," said Jenkins, president accounting firm Jenkins & Co. in Southfield, Mich.
"The car was just Rodney Dangerfield over the top," said Jenkins, who drove the convertible about 10 times or so a year. But unhappy with the high cost for maintaining the car, Jenkins sold his red-and-white, two-door head turner around 2002 at auction for $29,500.
It's bad enough to sell a car at about $9,000 below costs. But consider that the car could have been worth about $138,000 today, according to the Hagerty Price Guide.
Just like stock or real estate, investors in collectible cars risk knowing the right time to buy and the right time to sell.
The 1960s muscle cars ran strong from 2005 through 2007, as boomers went after the horsepower they couldn't afford in their 20s.
But if you needed to sell a muscle car once the recession hit, you were going to get 25% to 30% less than a couple of years earlier, said McKeel Hagerty, CEO of Hagerty, a national specialist in classic car values and insurance based in Traverse City. Mich. "It was a definite pullback."
But as the economy has recovered, muscle cars bounced back, he said.
Collectible cars are a "hedge plus an indulgence," in the opinion of Tony Richards, 69, who grew up in London but later worked for both Ford and Chrysler. He once ran Lamborghini in Italy years ago when Chrysler owned it and worked on the board of Maserati as the Chrysler representative.
"People like tangible investments, rather than boring paper in a bank somewhere," said Richards of Oxford, Mich., who retired from Chrysler in 2001.
Richards once had two classic Jaguars, a 1956 XK 140 SE Jaguar with a drophead convertible and a 1966 E-Type Jaguar convertible. He sold both last September. The scarlet red E-Type sold for around $75,000; he paid $61,000 for it about seven years ago. The maroon 1956 XK 140 brought $145,000; he paid $115,000 for it in 2003.
"I thought the market was pretty high, so I decided to cash out," Richards said.
But Richards now thinks he might have sold the cars a little too early and probably a little too cheap.
That's not his only regret, particularly the E-Type, which is widely regarded as one of the best car designs ever. "They're not going to make anymore 1966 E-Types," Richards said. "In fact, I wish I hadn't sold it."
How much money you might make buying and selling a classic car, of course, depends on the kind of car you buy and how long you keep it.
As an investor, you'd want to try to hold onto a collectible car for at least five years in most cases, Hagerty said.
And he said that buyers should aim to understand a particular make and model before investing, such as join a Corvette club if you want to buy a classic Corvette.
And it's best not to buy on emotion. Think about the long run.
"People are starting to see the cars more as rolling art than weekend toys," said Donnie Gould, president of Auctions America in Auburn, Ind., which has a five-day auction event around Labor Day.
As we were cleaning our newsroom recently, I found a 10-year-old clipping from the Wall Street Journal that listed 50 collectible cars and prices. Hagerty researched the 2014 prices for them and all -- even those rated "sells" then -- would have made some money in 10 years.
For example, a 1971 Mercedes-Benz 280 SE 3.5 — rated "sell" in 2004 — would be up about 10% in value, according to Hagerty, at about $54,600 now vs. about $49,500 in 2004.
The "buys" on the WSJ list in 2004 included a 1970 Ford Boss 302 Mustang priced at $31,300 and up. That car could be worth $85,000 today, a gain 172%.
But remember, when you see six-figure selling prices that many investors could have had to spend six figures properly refurbishing some cars.
Some things to consider if you want to try to turn a profit on a collectible car:
- The net capital gains tax rate is a maximum 28% on profits made from collectibles, such as classic cars and art. If joint adjusted gross income is more than $250,000, a 3.8% excise tax also would apply.
- Some say buy the best possible car you can in the best condition. Rust can be hard to overcome in a classic car. Restoration can be far more expensive than you'd realize.
- Be prepared spend money on your vehicle. "Be mindful that every single car has issues," said Hagerty.
- Some experts recommend buying a car that you'd love to own and skip the notion of making money overnight.
Source : http://www.usatoday.com/story/money/columnist/tompor/2014/08/17/classic-car-collecting-speculation-flipping/14074925/
No comments:
Post a Comment