Yes, collector cars can be a really lucrative alternative investment strategy.
Tyler Willy
Do you remember your dad always telling you to never buy new? He’d furrow his brow and say “You lose X% in value the moment you drive it off the lot”. Well, that isn’t wrong as MSRPs on new cars can get out of hand and buying from a typically aggressive dealership salesman over haggling with a private party in the WalMart parking lot will always lead to higher prices. All that being said, those are not the cars we are talking about investing in. We are talking about strategically buying cars that have a high ceiling for value by using data that is already available.
Sure, the last few years have seen some anomalies with new cars being worth more than you paid for them at the dealership. Most dealerships have even caught onto that by adding their respective dealer fees above MSRP. However, there are a lot of rare factors contributing to this. The supposed supply chain shortage, lower interest rates and more money sloshing around the economy all contributed to this. It wasn't just cool sports cars either. My 2020 GMC 2500 was worth $10K more than I paid for it, brand new, at one point. It was definitely some strange times but important to note, because it was still an opportunity to learn from. There were signs and it has happened before. The contributing factors mentioned above are those tell tale signs of inflation being right around the corner. It’s as simple as ensuring you own these assets before inflation hits.
While playing the spiky inflation game on a 10-20 year cycle is an opportunity, the other, more consistent option to invest in, is collector cars. Remember the other thing your dad and his friends say, “ I wish I never sold that 1969 Chevy Camaro or Ford Mustang.” Yah, they were right about that one as well. There are a lot of cars from the 60s and 70s that are already hitting that ceiling I referred to earlier and I will get into other ways to pull more money out of those cars in later articles. The strategy point I’m making here is generational and how cars from each generation increase in value as each new generation starts coming into more wealth.
Picture the “car poster on your wall” stereotype that’s often brought up. Mine were covered in Vipers and Countachs and I am pretty sure there were a few million other kids from my generation with the same two cars. Those were obviously cars we could only afford to buy on posters. My generation is now well into our 30s. That comes with many of us in careers for 10+ years now, and subsequently making decent money. The car people in this generation are also starting to reminisce about those cars we all had on our walls. I think you can see where this is going. Again, the last few years have been an anomaly with collector car price increases but a car that has outpaced most other cars in percentage of price increases are Dodge Vipers. In early March of 2020 (we all remember that month), a 1996 blue and white Dodge Viper with only 11,000 miles sold for $48,000 on Bring a Trailer. Another 11,000 mile blue and white Dodge Viper sold for $106,000 in May of 2021. That same car was then relisted in August of 2023 and sold for $81,000. There is A LOT to unpack from this little case study but here goes.
The COVID years and the ensuing inflation had a huge impact. A nearly exact comp increased in price by 120% in just over a year. Selling collector cars in 2021 and 2022 was too easy. People sitting on collections pre-COVID were swimming in equity and we saw a lot of collections being sold. Strike while the iron was hot was an understatement. The other item to note here is the poor guy that sold his $106,000 Viper for $81,000 two years later. The iron had cooled significantly for them. Let’s just hope it was worth $25K to look at that Viper for 2 years since it was relisted with the same mileage.
In the world of investing, there are tons of value fluctuation examples like this to choose from and you might expect them to all be hard asset related. Well, another example is what a majority of 401Ks rely on. The stock market. There were swings just like this in the stock market and not just the last few years. We will dig a lot deeper in future articles on how collector cars compare to other investment strategies and what opportunities they may open up. There are a lot of similarities but also a lot of differences. Whatever the case, for savvy, educated investors, there is money to be made. Navigating those comparisons is where we can help you maximize ROI in something different than just your boring 401K. Yah, I said it.
Let’s have fun investing!
