When was the last time you walked into your financial advisor's office and lovingly stroked your stock certificates? Or compared their sensuous flowing lines with other investments as you watched their value increase?
Passion, beauty, excitement, competition, high performance, prestige, exclusivity, special events, opportunity to meet like-minded aficionados -- these are not words typically associated with investments. How do you put a value on any of them individually, let alone combined? You certainly don't get those qualities owning Microsoft or Google stock. Plus, you don't have to fret over your investment fluctuating wildly on a daily basis. And let's not forget that Microsoft or Google can always issue more stock, which devalues yours.
However, they're not building Ferrari 250 GTOs or Shelby Daytona Coupes or 1964 Pontiac GTOs any more.
Now, don't make the mistake of thinking car collecting is a profitable hobby just for billionaires. In fact, there are collector cars in every imaginable category and in every price range -- from a few thousand dollars to $10-million-plus.
How does one go about this type of investing? Well, just as in traditional stock market investing, there are two ways -- do it yourself or hire an advisor. Either way, the best place to start is by actually attending a few auctions, watching the action, walking about and examining the cars, and talking to the many experts who are always happy to offer advice.
Unlike stocks and bonds, which one buys purely in the belief they will appreciate in value, collector cars should be acquired because of the attraction they hold specifically for you. Perhaps it's their beauty, performance or memories of youth.
RM Auctions, a Canadian company based in Blenheim, Ont., is considered by many to be a world leader in collector car auctions. RM has 10 insider tips for classic car investing it will gladly send to you, but they can be summed up in three words -- desirability, conditions and rarity. There's also no doubt that provenance plays an enormous role. Provenance is a combination of history and originality.
This inevitably brings us to the Ferrari 250 GTO -- arguably the most famous and valuable car ever built. In 1962, a new Ferrari 250 GTO, a race car that could also be driven on the street, would have cost about US$18,000. Just three years later, no longer truly competitive but still a wonderful car, it could be acquired for US$15,000. However, there were only 39 GTO examples made. Last year, one sold privately for a rumoured US$28.5-million. That's 190,000% appreciation in 43 years. This surely beats the TSX, which returned a comparatively paltry 1,053%.
This May, at the RM Auction at Ferrari's Maranello headquarters, a 1957 Ferrari 250 Testa Rossa smashed the auction world record at US$12.4-million. Its list price new was US$12,000.
Another unique and desirable race car was offered for sale by Mecum Auctions at its prestigious Monterey, Calif. auction in August, part of week-long festivities that include the Pebble Beach Concours d'Elegance. This was where you might bump into a very remorseful Bob Bondurant.
A 1965 Shelby Daytona Coupe, one of only six ever built, was the first American car to win the coveted World Manufacturers Championship. Bondurant, noted American race car driver, bought this particular one in 1968 for US$4,000 and promptly sold it for US$10,000, ecstatic at his good fortune and quick profit. At Monterey, it sold for an impressive US$7.25-million.
The granddaddy of all auction action is held each January in Scottsdale, Ariz., where up to 4,000 cars can come on the block, the majority at no reserve.
No fewer than six auctions take place over 10 days, including the world famous Barrett-Jackson event, which concentrates on American cars, especially 1960s muscle cars. Barrett-Jackson is as much car show as auction and draws 250,000 visitors over its week-long run.
If you have any motor oil at all in your veins, this is a spectacle not to be missed.
In 1993, Barrett-Jackson created a "mini index" of cars that represent the diversity of the collector car market spanning from 1957 to 1970. The cars in this index are the 1957 Thunderbird, 1967 Jaguar XKE, 1967 Shelby GT500, 1970 Camaro Z/28, 1970 AAR 'Cuda, 1965 Austin-Healey MK III and 1967 Corvette 427/435.
The value of the cars in the mini index grew by a compounded annual growth rate of 16% from the first quarter of 1998 to the same quarter in 2008, which included economic and political upheaval stemming from major events ranging from the U.S. invasion of Iraq, the dot-com bubble crash and 9/11. During that same period, the Dow Jones Industrial Average grew a compounded 5% annually, while the S&P 500 Index grew 4%. The price of gold grew a compounded 11% in the same period.
Craig Jackson, the chairman and CEO of Barrett-Jackson, has said that although most people buy collector cars to enjoy "they have also proven to be one of the soundest investment vehicles in the global marketplace over the past 10 years. It's rare that a hobby and someone's passion has the potential of being a great investment."
Scottsdale, because of its size, diversity and January timing, is regarded as the barometer of collector car values and a perfect place for winter-weary Canadians to begin their adventure.
So, take some of that hard-earned money and have some fun.
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