Collector Car Market of Tomorrow

Many people used to consider collector cars an investment, similar to pieces of art and rare jewelry. But in the past decade this market has demonstrated unusually high volatility. Prices on classic autos dropped sharply following the 2008 financial crisis only to reach new record highs by 2015. At that time many potential buyers started questioning whether such a rise was a sign of a market bubble. They were right– the collector car bubble did indeed burst, along with art and other high-ticket commodities  in the luxury goods segment, as well as high-priced real estate. 

Collector car prices

Hagerty, the collector car insurance and valuation company, has reported a 0.2% gain in prices of classic cars valued under $100,000 and a 0.5% increase in the more expensive segment. According to Dave Kinney, publisher of Hagerty Price Guide, there is a clear shift of interest toward affordable classic cars, while buyers of top-tier vehicles are becoming more discerning and selective.

However, it’s hard to judge collector cars as a market in general, because of the wide range of vehicles considered ‘classics.’ For example, there are clearly different types of buyers looking for a 1980 Mazda RX-7 worth around $5,000, and a 1970 Plymouth Superbird that resells for $230,000. Not to mention truly exceptional cars valued well above $1 million.

Defining a ‘classic car’

There is no clear definition of what makes a car a ‘classic’. People usually rely on common sense or ‘gut instinct’ when determining whether the vehicle belongs to this category. The Telegraph’s correspondent Ed Wiseman suggests we consider classic any car that is older than 15 years and holds a value above 15,000 British pounds ($19,500). Although this perspective makes sense, laws in many U.S. states require a vehicle to be older than 25 years to be considered ‘classic’ for taxation purposes (those over 100 are regarded as ‘antique’)

Wikipedia suggests the following definition: “(An) older car with enough historical interest to be collectable and worth preserving or restoring rather than scrapping.” From my viewpoint, a vehicle has much higher potential to become a classic if it was produced during short periods of time and/or in limited quantities. For example, a standard BMW 3-series from the ‘80s definitely has historical interest, but it is very unlikely to hold value because those vehicles have been in mass production and many can still be seen on the road (they currently resell on craigslist for $2,000 – $3,000). But the sport modification version BMW E30 M3 (1986-1991), only 17,970 units of which were built, is now valued well over $30,000.

Future ‘classics’–cars that might increase in value

Collector cars don’t just emerge out of nowhere. Most of them are cars that hold value throughout the years, and could significantly appreciate in price over the next decades. It is relatively easy to spot future classics following the guidelines mentioned above. To maximize potential ROI, I would lower Ed Wiseman’s price barrier to over $10,000 and move the vehicle’s age requirements back closer to 25 years (let’s search for cars between 1992 to 1997).

Potential collector cars that may or may not make a good investment:

1. Acura NSX (first generation). This vehicle is already considered a modern classic and is listed for sale for $50,000. 
2. Mercedes 500E. This is the top version of W124 which was produced from 1989 to 1995. Only 10,479 were built and sold worldwide.  
3. BMW M3 E36. Despite a large increase in production numbers (70,000 of these vehicles were built from 1992 to 1999), these cars still hold their value. In order to buy a true gem, look for one of the limited edition or special versions such as European BMW M3 GT, only 356 of which were built, or American M3 Lightweight.
4. Mustang SVT Cobra. SVT Cobra is a high performance version of the Ford Mustang, the first two generations of which were built in very small quantities. 
5. Nissan 300 ZX. This car already has some value and its 1993 version resells at $12,000. However, with 164,000 cars produced during 11 years this model is far from rare and is less likely to become more expensive in the next decade.

Limited edition and premium versions of popular cars tend to appreciate in price over time, but for older vehicles the condition of the car is also very important in determining their value. For any investment in a collector car to remain profitable, the owner has to take good care of it and maintain it properly. Despite the recent ups and downs of this market in general, there will always be demand for the ‘unicorns’–rare cars in perfect condition.