Don't bet the farm on future value of collectible cars

whiteman

Saturday April 21, 6:00 am ET

Terry Jackson



If you have access to the cable TV channel Speed, you probably have seen the spectacle of conspicuous consumption known as the Barrett-Jackson classic car auctions.
The granddaddy of them is held every January in Scottsdale, Ariz., while the East Coast offspring is held in March in West Palm Beach, Fla. Each event draws thousands of bidders who spend obscene amounts of cash for the cars they dreamed about as penniless teenagers.

Six-figure sums for 40-year-old Mustangs, Camaros, GTOs and the like are common. At Scottsdale this year, someone paid more than $5 million for a one-of-a-kind Shelby Cobra roadster.

Since most of these gilt-edged collector cars originally sold for between $3,000 and $7,000 when new, it might be reasonable for today's new-car shopper to wonder if there are 2007 models in dealer showrooms that may become classics 20 years from now, that could potentially finance their toddler's college education.

The short answer is that banking on a huge payoff two or more decades hence from a new car bought today is akin to playing the lottery: Someone will win, but it's probably not going to be you.

Rarity, combined with desirability, drives the value of collector cars.

Consider this: A fully restored 1965 or 1966 Mustang can bring $25,000 to $40,000 today, which may seem like a great payoff for a car that began life with a base price of about $2,300. But adjusted for inflation and factoring in restoration costs, the price of that classic Mustang today is -- at best -- a break-even proposition.

But suppose the Mustang in question is a 1965 Shelby GT350, which stickered for $4,547 when new? That car today could bring $300,000 or more -- clearly a bonanza, even after factoring in inflation and restoration costs.

The difference is the rarity and desirability. In 1965 Ford sold more than 600,000 garden variety Mustangs, but only 562 Shelby GT350 Mustangs were made in 1965.

Using that criteria, there are very few new cars that would appear to qualify as future collectibles.

The new Shelby-themed Mustangs are natural contenders. They're pricey and are, at this point, only being produced in small numbers. The Z06 Corvette and the SRT-8 versions of the Chrysler 300, Dodge Charger and Dodge Magnum are also contenders.

Convertibles of all types tend to become collectible, though the sportier models are the best bets.

Exotic sports cars like Ferraris and Lamborghinis seem to be good investment vehicles, but not always. A Ferrari Mondial has the Italian pedigree and a mid-mounted V8. More than 6,800 were made between 1980 and 1992 and were priced over that period from $64,000 to $113,000. Yet today it's possible to buy a Ferrari Mondial for $25,000 or less, largely because it was, for a Ferrari, produced in large numbers and was regarded by many as an ugly Italian duckling.

So the lessons for a new-car buyer today should be this:

Buy what you want to drive today because the car fits your needs.

Stick to mutual funds when it comes to investment vehicles.