Classic Cars and Investing

For several days each August, the beautiful seaside town of Monterey in California becomes mecca for those obsessed with everything to do with cars.  The week’s activities include no less than 7 classic car auctions, historic racing at Laguna Seca, and several concours events culminating on Sunday with the incomparable Pebble Beach Concours d’Elegance.  Golfers talk with reverence about their walk up the famed 18th hole at Pebble Beach at the end of a once-in-a-lifetime day of golf.  I will never forget standing on that same fairway a few years ago looking at a line of 20 (!) magnificent pre-war Duesenbergs.

This week’s events in Monterey got me thinking about the similarities and differences between the classic car market and other forms of investing.  The past 5 years saw the collectible car market  going through a bubble, fueled by the same cheap credit that drove the stock market, vc/pe, and real estate bubbles.  Once the credit markets dried up and the recession took hold, the classic car collector market tanked like other investments.  In the last 12 months the average collector car values have plunged 30% – 40%.  

Unlike the real estate market, however, these cars have continued to sell – just at lower prices, and there isn’t six months of inventory waiting to be sold.   Most of the auctions the past year have seen sales dollar volumes drop, but not the number of cars actually selling.  Like all forms of investing, some classes have been hit harder than others, but it seems that car collectors don’t give up their hobby – they just get smarter about their purchases. 

The top of the market is a lot like the current situation in equity investing.  The best cars/companies are still getting top dollar.  At least a dozen cars will sell this week for over $1 million, and some record prices will be eclipsed.  At this level, investors in both the equity and collector car worlds are looking for “no stories” cars/(companies);  those with a unique niche or are one-of-a-kind;  that have a well documented history; and a virtually flawless presentation.  The advice from the experts on buying a collector car is the same I’ve heard from investment bankers…. you can never spend too little for a bad car/(company), and it’s hard to over pay for an excellent example with no stories or questions. 

Perhaps the most important difference between the collector car world and other forms of investing – you can’t take those other investments out for a drive or park them on the 18th fairway at Pebble Beach.

(To keep up with everything related to the Classic Car Market, check out Keith Martin’s Sports Car Market: http://www.sportscarmarket.com/)