Assets you'll really want to shift

Stock market got you down? How about a classic car to give you a lift?

Collector cars "may not [always] be a great financial investment, but they're a great emotional investment," says Fred Kanter, a car collector who just picked up five more rolling works of art last month at Ford's auction in Dearborn, Mich. On the block: old concept cars, the limited-edition creations meant to showcase a carmaker's design prowess.

For the past 25 years, Mr. Kanter has driven around in the car he fell in love with as a 13-year-old at the New York Auto Show in 1958 – a one-of-a-kind Dual Ghia 400, a Chrysler-based concept car.

In 1970, he saw the car for sale for $10,000 in New Jersey, but couldn't talk the owner down to a price he could afford. Seven years later, a friend who owned a gas station told Kanter that a Dual Ghia had come in for service. "I asked him what color it was. He said yellow and black, so I knew it was the car. I came down right then and drove it home that afternoon."

Kanter, the president of Kanter Auto Products, which sells replacement parts for American collector cars, bought the Dual Ghia for $7,000. Now he thinks it's worth between $175,000 and $250,000.

Other collectors constantly question Kanter about his decision to register and drive an irreplaceable piece of automotive history. "My kids are more valuable than my cars, and I let them out of the house," he responds.

Kanter has the right attitude, says Richard Lentinello, editor of Special Interest Autos magazine in Bennington, Vt. As with other collectible assets, such as paintings or Persian rugs, any investment's potential for profit should be secondary.

"We recommend people drive them and enjoy them and don't worry about what they're worth," says Mr. Lentinello, whose magazine nonetheless publishes an annual list of collector cars that are appreciating. Recent lists have included the Porsche 912, BMW 2002, Pontiac Le Mans, and the Sunbeam Tiger. The list includes only cars in good condition for under $10,000. Ratty rust-buckets don't qualify.

Buying such cars, collectors say, has special allure in the post-Sept. 11 era. "Collector cars are an emotional safe haven right now," says Keith Martin, editor of sportscarmarket.com in Portland, Ore., and one of the nation's foremost experts in collector-car values. "People get a feeling of emotional reassurance" from them.

And as an investment strategy, buying an antique car today may appear less frivolous than a few years ago, when the stock market was skyrocketing. "From a collector's perspective, if [the market] is not going to make you money, you might as well put your money into something that will give you some enjoyment," Mr. Martin says.

But "if you're expecting a 15-to-20 percent return with no hassle, physical items can't [deliver] that," he adds. "You have to insure them, and store them, and care for them."

Those costs eat up potential profits. Take the 1976 Cadillac Eldorado. Back then, the car was widely believed to be the last American convertible. Thousands of collectors scooped them up for about $9,000 and stored them in warehouses. Today these Cadillacs are easy to find for about $15,000 – a 60 percent gain over 26 years. But deduct the cost of storage ($50 a month would run at least $15,000), insurance (at least $5,000), and correcting deterioration after 26 years of storage (another $5,000), and you don't break even.

Vette Views magazine conducted a similar study of two popular Corvettes: the original 1953 and the powerful 1967. It concluded that while the 1953 went from $3,488 new to $100,000 in 40 years, and the 1967 went from $4,389 to $90,000 in 25 years, neither could beat the stock market over the same time after considering maintenance and storage costs.

"But if you count the tires, maintenance, and the cost of storage, that takes all the fun out of it!" Martin says. Most enthusiasts write that off as the cost of enjoying the car.

Without maintenance and storage costs, most collector vehicles will return about 10 percent a year, he adds. Martin and other collectors believe antique cars are generally not overvalued and wonder if they will see a repeat of what happened during the 1990 to 1991 recession, when collector-car values hit record levels. The bubble burst in 1992, and values have not recovered yet. Some enthusiasts are wary of the antique-car market heating up.

"We don't want to educate the public, because that will drive values up again," says Lentinello.

The most popular collector cars today are American muscle cars from the late 1950s to the early 1970s. The reason: demographics. These are the cars baby boomers love, and many boomers have plenty of disposable income.

Collectors gravitate to the cars they grew up with, say experts. "Collectors tend to spend more time standing in the garage looking at the car, thinking about great times, the simpler times of their youth," says Martin.

But take care before you buy. "There are only two ways you can go wrong" in buying a collector car, Martin says: "buying a car that needs a lot of work, or buying something that's not what it appears to be."

Restorations can cost two to three times what the car will be worth after the work is finished.

And just because you read that a 1970 Chevelle sold for nearly $100,000 at auction, don't expect the old Chevelle in your garage to be worth the same, Lentinello cautions. "People see these things and they don't realize that that car was really special." For example, only a handful of Chevelles were sold with air conditioning along with the RS4 performance option package – which included suspension upgrades and a Corvette engine.

In addition, some muscle cars on the market today are souped-up versions of lesser models with the same body style – referred to by some collectors as "clones." Rare, original muscle cars are worth much more than these look-alike siblings. Experts warn that unless a muscle car comes with original paperwork to document its authenticity, it may be a clone.

To avoid this trap, it helps to buy what you know.

Car clubs exist for just about any make or vintage and provide information about cars that interest you.

"Buy the best car your budget will allow," says Martin. But don't break the bank. If you pay too much, he says, you'll be so worried about the money you won't enjoy it.

In any case, car collecting can be a lot more fun than buying stocks. Just ask Kanter. At the recent Ford auction, he bought 10 percent of the inventory for "too much money," he says. "But in 20 years, I'll look back and I'll be glad I bought them."

Picking a profitable collector car is similar to buying a piece of fine art.

Like old paintings, not every old car is collectible. So buyers must do a fair amount research so they wind up with a Van Gogh rather than a "van no-go."

At the top of the collectible-car price heap are rare Ferraris, Bugattis, and Shelby Cobras – especially proven winners on the race course. Many of these sell for millions of dollars.

Just below these vehicles are luxury cars of the 1930s – Duesenbergs, Packards, Cadillacs, and Pierce Arrows. Most cost hundreds of thousands.

Below them are more mainstream "exotics": Porsches, Jaguars, and American muscle cars from the 1950s, '60s, and early '70s. Found more often on the road than in museums, these are usually worth about $20,000 to $80,000 depending on rarity, condition, and originality.

Below them are an amalgam of beaters, basket cases, and just plain used cars. Yet some of these cars may actually grow in value as they age. Richard Lentinello, editor of Special Interest Autos magazine in Bennington, Vt., publishes a list of cars available for under $10,000 that he considers to have better-than-average appreciation potential.

Here are some guidelines car collectors use to help them determine an antique car's value:

Age: Collector cars are 20 years old or older. It takes that long to sort out what is valuable, says Keith Martin, editor of sportscarmarket.com.

Pecking order: Since collector cars are generally saved for sunny days, convertibles are almost always more valuable and appreciate faster than hardtops. Likewise, two-door vehicles outpace four-doors, and fastbacks or coupes trump sedans.

Original popularity: Cars that were not popular when new will not be popular later on.

Physical beauty: Collectors spend a lot more time looking at their cars than driving them, so they must look good.

The swagger effect: A car's "machismo" is perhaps the most ethereal of value indicators, but is one of the most important, Mr. Martin says. When it comes to muscle cars, for example, Chevys have more swagger than Fords, Fords than Dodges and Plymouths.

Rarity: A car's value is severely limited if more than a few hundred of a particular model rolls off the assembly line. Automobiles built in larger numbers can still appreciate, but may never be worth seven figures. But rare versions of mass-produced cars, such as a 1971 hemi-powered Plymouth Barracuda convertible (only seven were built), can be worth well over $250,000.

Racing history: A car's value is enhanced if it has performed well in professional auto races. Ferraris, for example, have a long record of racetrack success. As a result, they are more valuable than Lamborghinis, which are mere status symbols for the rich, says Martin.