Thought exercise: Investing in Appreciating Autos

Last night my wife and I were debating about what sort of goods would be best to invest in if you had a million dollars and were trying to grow it in the current economy. Her suggestion was some fancy expensive birkin handbags. Naturally I suggested cars. 

If you were to have $1M to spend on a car or cars with the goal of maximizing the appreciation over one year what would you buy?

In reply to bgkast :

A index fund. 

Whatever low production limited edition exotic that can be bought. 

frenchyd said:

In reply to bgkast :

A index fund. 

This x1000. It is proven that there is no 10 year period in history where a cars value has out paced the stock market. 
 

This vid is titled about Wife's and your car hobby but he also touches on investing in cars. The bottom line is if investing in cars is for you to get pleasure and enjoyment from then go for it. Don't invest in cars thinking you are going to make money.  The only way to make money with cars is if you have access to whole sale/dealer pricing versus purchasing a car as an "investment" at full retail.  Think of it this way. If the car was going to make money by not selling it the dealer would not be selling it. 

Now if I was spending a pile of money on a car or two with an eye towards resale down the road it would be a Ferrari 458 or 488. Or somthing 911 from Porsche. GT3 RS. Maybe?    GRM did an article on the last truly manual 911 a while back and that WAS a potential good investment as the resale values of them went way way up but then Porsche a couple years later made another manual one and those original "last" manual cars lost 100k in value over night. My friend picked one up and even with the 100k discount it has continued to slowly loose value as it became just another modern manual 911. 
 

I keep telling him I would give him 20k for it but that is less than 10 percent of its current value down from the mid to upper 300k range at their peak about 5-6 years ago. 

As he puts it he got it as an investment in  himself.  If it eventually appreciates back to what he paid for it he will be thrilled but for now he drives it with out care measuring his "investment" in smiles per mile.  

Looks like some of us didn't read the criteria. 

What car? The best, rarest examples of JDM hero cars. Evo, STi, GTR, RX-7, Supra. You will not loose money.

Given recent trends...

Whatever highly anticipated vehicle that will get a wait-list and ADM.  C8, Bronco, Z, C8Z.  Get on a wait-list early....sell as soon as you get it.

The middle of the market is hard to make money, but it seems like the top end of the market for rare/collectible cars sees pretty steady growth. With $1m you could get some stuff that would be pretty much guaranteed to at least maintain it's value. For my money it would be an original Ford GT or something like it. Unfortunately you wouldn't really get to enjoy your investment, it would mostly just cost you money while you store it.  

In reply to Appleseed :

Cars cost insurance, maintenance, and the risks of the market.  Ferrari's once were insanely valuable and then the market really softened for a long time.  Cars bought for Millions lost 50% or more of their value. 
   Selling for a return requires timing the market. Whereas an index fund might soften but probably not  as much as a select market for one car.  
  I love cars. But it's a hobby. 

A 1 year timeline is super short. I'd guess that buying and fixing older trucks like 67-72 Chevy's or square body's could net some nice gains. 

In reply to STM317 :

This. A year is really too short for anything but speculation, be it a car or an index fund. 

Think about who has the money to spend and what their hero car was when teenagers.   10 years ago it was 60s muscle cars.  It has been changing.  It is also really hard to time the market especially for one year.  
 

I bought my 05 NSX 4 years ago for $62k because I wanted one and I didn't think I would lose money.  Now, after 8k miles of driving and basically nothing else, it is probably worth $80k.  It is in the right range for people who now have money but previously had it on a poster in their bedroom. 

In reply to frenchyd :

I don't think anyone here is actually entertaining the idea of doing this. More of a mental exercise for fun. I don't know crap about investing,  and even I know speculating on car investing is a bad, bad idea.

1 million is nothing and yeah your not making money with that unless its a fluke in a year on a car. 1 Billion as many dealerships as I could find in major cities that did not survive the lack of cars or were on the edge and start building condos. 

I'm in this business and I agree with the index fund suggestion.

Picking the winning car in 20 years is probably harder than trying to time the stock market.

There was a time when those million-dollar Lincolns, Packards and Cadillacs were just old, used cars that got chopped up to be tow trucks because they had big engines.

Who in their right mind would have saved a Ford Falcon or a Corvair?

5/8 of my cars have been on the future classics list that Hagarty puts out. 3 years running I have had at least one car on the list.

I would never buy a car an expect to get rich from it though. I'm a driver.

If you buy the right car, enjoy it and take care of it. You can be sure to get your $$$ back out of it when you're done.

Anything else is a bonus.

I think one year is too short for the intended thought exercise, because car values dont change that quickly. So if we're talking one year it would be any clean car with not too high a mileage and an expensive problem you can fix yourself, like buy a car that needs head gaskets, fix it and flip it.

If we're talking ten years, buy the cars that kids wanted in high school 10 or 15 years ago. In ten years those kids will have disposable income. Look at what the prices have done on clean g bodies and 4th gen f bodies. Ten years ago you could buy them cheap. Now they command a premium and you see them at car shows.

In reply to dean1484 :

I don't know. Look what the value of clean E30 M3 has done in the last decade. You used to be able to pick up a clean one for $20k. Now it takes nearly 6 figures to buy a clean one. 

Of course, that's a one off type of thing. 

The forum has talked about how high used car prices are right now.  If that's true, investing now is betting that already high prices will go even higher.  I think it's more likely that prices will come down over the next twelve months.

You must also pay for insurance and storage.  If you're buying a single $1 million car you're not going to store it in a non-secure, non-climate controlled garage with special steps to keep out moisture, bugs and rodents.  If you're splitting your money and buying multiple cars you need even more space.

Also, you must factor in your selling costs on the back end such as listing and auction fees.  If you're only holding for one year then you can't spread selling costs over multiple years' returns.

My answer as to what car(s) to buy right now with $1 million to maximize return over one year would be >no cars<.  You'll do better just sitting on your money.  Even better, invest it in something safe from a market correction like a 12 month CD.

Sorry, not a fun answer.  But investing is all about buy low, sell high.  When the market is high it's difficult to make money.

I have a good friend who was very successful doing this. He would buy cars that had some level of desirability, but were either a little rough around the edges, dirty, modified, or just something other than stock. He would clean them up, do minor repairs and return them to stock with correct wheels, hubcaps, tires, etc. then sell them. He started in the late 80's with a 57 Ford. Before long he had his and her's 55 Chev Bel Airs, and was doing strictly Corvettes, replacing the 350's with 283's and 327's, the wide tires and Cragars with hubcaps and wide whites, and making them look as original as possible. He did very little of the mechanical work himself, that's where I came in, and concentrated on the buying, selling and parts scrounging.  He would do a couple a year.

At the same time he was loaning us, me and my body man friend, the money to flip cars. He would front us the cash to purchase, I would do the buying, selling and mechanical work, my buddy, the body and paint, and  would charge us 10%. He wasn't making a lot of money on that arrangement, though, in some cases we would buy a car, detail it, and sell it the next day at a profit. And 10% return is still 10% return,