Moving Assets

Investing in collectible cars

At many collectible car auctions, the vehicles can be visually inspected before bidding, but test drives or exhaustive inspections usually aren't allowed. Thomas Trompeter/Shutterstock

When the topic turns to investments, many people discuss stocks, bonds, and perhaps real estate. But what if there’s an asset languishing in Grandpa’s garage under a layer of dust that could fetch a six-figure price?

Some investors see vehicles as viable alternatives to traditional assets. Many specialize in vehicles in perfect shape from specific manufacturers or production years, and others simply seek a good deal, regardless of age or condition. As with most investments, one can make impressive profits or lose a significant amount of money.

Auto auctions are an exciting, lively way to purchase collectible cars. But when the hammer goes down, you just bought it "as is," so be careful before raising your hand. Courtesy of Mecum Auctions

Back in 1967, a Chevrolet Chevelle coupe had a manufacturer’s suggested retail price of $2,825, with the Super Sports model option adding $285 to the price. At a recent Mecum Auction in Kansas City, a Chevelle SS went for $104,500.

Although it boasted a custom-built V-8 engine, the winning bid reflects the current value of collectible cars from the 1960s and 1970s, and reflects a nice return on investment by the seller, even after taking into account the restoration expense.

When considering a vintage or collectible car as an investment, pay close attention to even small details such as gauges and knobs; original equipment versus replacement items will affect the value. Radoslaw Lecyk/Shutterstock

Some collectors spend months crisscrossing the country, peeking into barns and out-of-business car dealerships, hoping to find a dusty gem. For most, the effort required can make this method extremely inefficient, but occasionally, the more diligent collectors find a forgotten treasure.

One example is a 1953 Porsche 356 discovered among 81 cars stashed and subsequently forgotten in a barn in France. The car required extensive repairs and restoration, but it sold at auction for almost $60,000 with significant rust damage and not having its original equipment engine. Clearly, large returns can be achieved by shrewd investors.

Reputable companies holding regularly scheduled auto auctions include Mecum Auctions, known for offering American muscle cars, and RM Sotheby’s, famous for gathering extremely rare and exotic vehicles.

To help improve the chances of significant appreciation, look for vehicles made in limited numbers, equipped with unusual and rare options, or from the first or last year of production. Kevin Tichenor/Shutterstock

The upside of an automobile auction is the fact that many cars are collected at one location and can be viewed over a predetermined time ranging from several hours to several days. Auction results also provide insight into current values. The downside is that the cars are usually sold as-is and can’t be test driven.

In many auctions, the cars are driven across the auction block, giving bidders a brief opportunity to observe and listen, and while bidders may be able to perform up-close physical inspections, there may well be no way to fully determine the actual condition of the car until after it has been received by the purchaser.

Because bidders can participate via the internet or by phone if an in-person visit isn’t possible, investors taking advantage of this option must be aware that auction buying adds extra risk.

In the event of a winning bid, the buyer pays the purchase price, plus any relevant state taxes and a buyer’s premium. The amount of the premium must be confirmed before bidding. Mecum collects a buyer’s premium equal to 10 percent of the winning bid for in-person bidders (12 percent for internet or phone buyers), meaning a car purchased for $87,000 would require a total payment that includes an additional $8,700, plus state taxes.

Although television shows regularly discover highly sought-after cars forgotten in old barns, the reality is that finding one comes down to either pure luck or extensive research and effort. Owaki/Kulla/Getty Images

Buyers must also arrange transportation of the vehicle no later than the conclusion of the auction. A quick internet search will identify numerous auto transport companies and brokers who can arrange for cars to be shipped across town or across the country.

The three main considerations are the cost, the timeframe for delivery, and assurances the car will be covered by insurance as it makes its way to a new home. An open carrier will usually be less expensive than a covered transporter, but this choice exposes the vehicles to potential damage from weather or debris.

Other ways to find cars include scouring print and online advertisements to find local candidates, attending car shows, and perusing forums dedicated to buying and selling vehicles.

An in-person pre-purchase inspection (PPI) by the buyer is always preferred, but if this isn’t possible, some investors arrange for a local garage or dealership to conduct the PPI, thoroughly inspecting and road-testing the vehicle in order to provide a written evaluation of the car’s current condition and note any defects.

Rarity plays a huge part in car value; this 1953 Porsche 356 found in rough shape after decades spent forgotten in a dusty barn sold for almost $60,000. Courtesy of R.M. Sotheby's, The Epoch Times

Television shows documenting “barn finds” are great entertainment, but pursuing this path is easier said than done. The TV shows have sellers contacting them in hopes of having their cars featured, but “normal” buyers need to ferret these opportunities out via word-of-mouth efforts.

Casual car investors may use vacations or business trips to look for potential acquisitions, but peeking into barns or dusty garages is very inefficient and absolutely not advised.

In any case, investors should buy a car they’d enjoy owning, in case it won’t sell for the hoped-for price.