Investing in Cars

"Brian Tschiegg" (WritingInCars) 08/28/2013 at 16:47 • Filed to: Acura, NSX, s2000, Honda, Investing

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I just opened up an E*trade(TM) account. Not because I was interested in investing. I did it so I would feel more like an adult (it worked). After buying stock in Ford and a couple of Pharmaceutical companies, I sat back and prepared to watch the money pile in. Serious investors know that is not exactly what happened. Apparently I have the market sense of a copper tub, except the copper tub has a much larger market value than me.

In an unrelated event, I was perusing the used car section of Craigslist and came across a nice NSX (ad has been removed now) that the guy was asking $70k for. I was blown away. When I was learning to drive, I tried to talk my dad into buying one. He was on the ropes about it too. You could pick up a nice example then for under $20k. After I showed him how much they had appreciated, he said, "I should have invested in it then."

This got me thinking: could cars be a better investment than traditional sources? According to my dad, the NSX definitely outperformed his portfolio over that time, but you have to take into account that the economy tanked during that time and the NSX is a seemingly rare example of a car that greatly appreciated. Looking at how other classic cars have depreciated, I would have to say that investing in cars is probably a lot more volatile than safely stashing your money in bonds and mutual funds, but my dad made a great point, "You can't drive your stocks."

The whole incident now has me looking at purchasing a Honda S2000. I think it meets the criteria for a car that should appreciate shortly as long as it is kept in clean, stock condition. It was a relatively low production numbers car, it is highly desirable, it has aged well, and it is generally agreed upon as a future classic. What really seals the deal though, is that even if I lose money on it, I will have at least owned a nice car for a while.

TL;DR: I am bad at investing, so I'm gonna buy a car.

Z_Stig > Brian Tschiegg 08/28/2013 at 16:51

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Cars are terrible investments. But your dad's right. Cars are more fun.

Brian Tschiegg > Z_Stig 08/28/2013 at 16:54

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I'm going to posit that new cars are terrible investments (unless you plan to keep it for the entire life of the vehicle). I would say with used and classic cars that they could be a good investment but are most likely not.

Casper > Z_Stig 08/28/2013 at 16:54

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Cars are decent investments, if you buy the ones of value and not the ones you want, and never drive them. Which is why they generally aren't. People want nice new cars, which are terrible investments. They want to drive their cars, which devalues the investment.

Lots of rich people treat cars like investments, but they have a lot of resources to keep them properly and too much else to do rather than driving them around.

Party-vi > Brian Tschiegg 08/28/2013 at 16:58

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Don't invest in an S2000. It's not an exotic vehicle like the NSX and it will appreciate like Honda's last sports car - the S800. Which you can pick up for the lofty sum of $10,000. That's right, a 40 year old sports car from Honda can be had in good condition for $10k. Plus the S2000 was readily available for purchase in the States and just ended production in 2009 (granted that's only 4 years after the NSX).

Then you have the production issue. Honda only sold around 19,000 NSX's, of which only 9,000 went to the US. The S2000 sold 110,000 units worldwide and we got 66,000 of them.

CounterTorqueSteer > Brian Tschiegg 08/28/2013 at 17:00

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A few years back, I tried to convince my father to pick up a beautiful Ferrari Dino that we saw at a car show selling for 45K. I told him that it would majorly appreciate in just a couple years. He disagreed, but I was correct.

LuczOr > Brian Tschiegg 08/28/2013 at 17:00

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1. Buy hunk of busted ass American Iron.

2. Resto-mod.

3. ???????

4. Profit.

Brian Tschiegg > Casper 08/28/2013 at 17:08

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Yeah and if I got my hands on an NSX at 17 I'd be wrapped around a tree right now.

Brian Tschiegg > Party-vi 08/28/2013 at 17:10

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Solid investing advice. You sir just became my new broker. The check is in the mail.

Casper > Brian Tschiegg 08/28/2013 at 17:12

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Yeah, that's the trick in never driving them. If it's an investment, it can't be anything else. You can't drive them, you can't modify them, you have to do everything possible to minimize risk... so even washing them needs to kept to a minimum. It becomes a garage queen of epic proportions that has to be appraised yearly to see if the investment is paying off or at least keeping up with inflation.

davedave1111 > Brian Tschiegg 08/28/2013 at 17:24

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If you pick the right car at the right time, it can definitely be a good investment. For it to be worthwhile, though, you need to be looking at the kind of car that's going to go from around £50k to £250k over a couple of decades. Proper blue-chip classics, in other words. (I have nothing against cheaper cars, but the maintenance cost is (generally) a much higher percentage, which is bad from an investment point of view.)

The problem is, it's still quite a high risk investment. It's only sensible as a small part of your portfolio. If you have a million or so to invest, and you like cars, it's a good plan. Otherwise, you're putting too many of your eggs in one basket.

If you're on a smaller scale, it doesn't mean you can't make money owning an appreciating older car. It's not an investment, though. Buy the car out of your fun money and hope that as a bonus it increases in value - and if you're good at spotting the price-trends, you should be lucky.

For what it's worth, my uncle's done about as well as you could hope to on his Ferrari. He bought a 250GTE at the bottom of the market in the early nineties, for whatever it cost back then. My dad bought a flat in London to rent out, for about the same money. I reckon that including all the rent, the flat's done a bit better - but not all that much, and my uncle's had a Ferrari 250 GTE to drive all that time. If it wasn't for the London housing market being so crazy, the Ferrari would be winning; then again, classic car prices have gone equally crazy lately.

davedave1111 > CounterTorqueSteer 08/28/2013 at 17:26

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I'm not sure how right you were, to be honest. Depends how many years back. The market in general has gone up greatly, but the Dino isn't a particularly stellar performer. Unless 45k was a complete bargain for a Dino at the time, I'd bet there are plenty of other 45k cars which would be worth more now.

rotundapig > Brian Tschiegg 08/28/2013 at 17:31

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I've been toying with this idea for a while now. Since I work in the automotive industry and follow industry news, and if you look at performance of the car companies that I would have been investing in over the last year, then they've done awesome.

I still haven't made that leap though, since I feel like I really don't know much about investing and feel like I have tons more research to do.

Cars themselves, on the other hand, I understand pretty well and have consistently made money on cars that I've bought & sold. The thing is, I spend tons of time research cars, looking for good deals, then working on the cars, and then selling them. Although I don't make much money at all doing this, it's great fun (mostly) and I feel like I thoroughly understand the risk (a car will always at least be worth its weight in scrap).

With the stock market, it seems like the potential gains are much greater, but I think in the end I would put in at least as much time in researching & understanding the stocks & tools I'm interested in as I do on cars and it wouldn't end up being nearly as fun and I don't think I'd ever fully understand the risks involved.

I'm not sure when I'll make that leap from working on cars to investing in the companies that make them, but I know I've got a lot of work to do.

B_dol > Brian Tschiegg 08/28/2013 at 17:42

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I too played the E*Trade game this January, and I invested in cars. Tesla. Still holding the stock. Not bad for my first pick.

Looking to invest in some other companies, maybe Groupon or something cheap.

CounterTorqueSteer > davedave1111 08/28/2013 at 18:39

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I am by no means an expert on the Ferrari market, but just based on my recent inquiries, it would have been a decent return.

http://www.dupontregistry.com/autos/Search/D…

davedave1111 > CounterTorqueSteer 08/28/2013 at 19:06

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I'm sure it was a decent return, but when you're looking at it as an investment, it wasn't that great. Was it the best combination of a nice car to own while it appreciates and a good rate of appreciation? Perhaps.

For me the one which got away was a Citroen DS Decapotable. I almost bought one (with money borrowed from my dad) as a teenager for about £5-6k. They now go for more like £100k. Mind you, I had no clue it was going to go up that much. I'd probably have sold it when it doubled in price, and sucked lemons ever since :)

Brian Tschiegg > B_dol 08/28/2013 at 20:31

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Damn good for you. I bought it when I was still "practicing." How I wish I was ready to bet my money back then.

Brian Tschiegg > rotundapig 08/28/2013 at 20:34

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That's basically where I was at. Then I realized that I should just make the leap. I only use disposable income on it. It hasn't affected my saving/spending, so I figure it can't be too bad.

I don't think anyone ever truly understands what's going on when they're investing. There are so many options (and options chains) that you can't ever know everything. I just took the leap and it's at least been entertaining if not lucrative.

Party-vi > Brian Tschiegg 08/28/2013 at 20:37

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Hooray! Who knew giving out advice to strangers on the internet while in your underwear would make you money!?

I mean, what?

Mosqvich > Casper 09/01/2013 at 11:48

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I would say this isn't exactly true. When I researching buying a Ferrari 400i, the Ferrari forums warned against buying such garage queens. Why? Simple, the seals and other rubber parts wear out and adversely impact the engine. That's not to say one would commute with such a car, but you certainly wouldn't want it to sit and have zero miles put on it. Also, imagine you had a Cobra (a real one) 30 years ago and you drove it frequently. The mileage on it is going to have negligible impact on value. In fact, the big thing now is having unmolested, unrestored, as-is vehicles and they can fetch a good chunk of money.

Casper > Mosqvich 09/02/2013 at 03:40

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I won't disagree that running cars is good for them, but I wouldn't say that it would have a "negligible" impact either. When I talk about not driving the cars, I am referring to taking them out and running them like you would a Porsche Boxster or Subaru BRZ. Cars do hold up better when run from time to time, but there is going to be a huge depreciation on a car that has 300,000 miles vs a car that has 30,000 miles... even if the 30,000 mile car has had the engine rebuilt the same number of times. Also, you can only fix so much wear and tear due to miles on original parts that are numbers matching before you have to completely replace the part with a new reproduction that will lower the value (for instance once you have too much play in engine components, have to sleeve the block, etc). Even if you place a limit of 10,000 miles of driving per year on an investment car, that can be 250,000 in 25 years, enough to seriously increase the number of parts that have to be completely replaced. While this won't immediately make the car worthless to a collector, it also won't be putting money in your pocket vs simply running the car every few months and replacing seals as needed.

Besides, my point was more directed at the risk factor. If you drive a car, the chances of the car being totaled go up astronomically vs a car that is kept safe. Once you total a car, it's totaled, unless you want to be extremely shady.