Many collectibles have seen run-ups in value that might make you think you’re missing out on a sure bet. For example, over the past ten years collectible cars have appreciated more than 450%, and fine art is up nearly 200%, according to the Knight Frank Luxury Investment Index, which tracks baskets of selected collectibles. Meanwhile, Standard & Poor’s 500-stock index has returned 111%.
But to make money in collectibles, you have to have the knowledge and skill to choose wisely and ride out the fads. You usually have to hold your purchase for several years before it appreciates, tying up an often substantial amount of money in a volatile, unpredictable asset. To realize a profit, you have to sell—and it can take months to unload an item, assuming you haven’t grown so attached to your darling that you can’t bear to part with it.
Many collectibles are bought at retail prices and sold back to a dealer at wholesale. If you sell at auction, you’ll get closer to retail prices, but commissions and fees take a big bite out of the sale price. On top of that, you’ll need to insure your collection, store it, and hand over a portion of your profits to Uncle Sam.
If you’re still interested, consider collecting as a supplement to your core investments, as an inflation hedge and, above all, as something that you can enjoy.
When he was a kid, Brian Styles had the biggest Hot Wheels and Matchbox car collections on the block. Thirty years later, after he sold the software company he started, the cars of his youth still called to him. His collection began with an impulse buy ten years ago—a 1970 Ford Mustang Mach 1—but it has grown into a stable of 20 pony cars from the 1960s and ’70s. Styles and his girlfriend, Samantha Styles (no relation), share the collection, from the thrill of the hunt to caring for their cars and entering them in shows.
Collectible cars aren’t just objects to admire. Part of the fun is that you have to drive them to keep them in good condition. “Buy what you have a passion for, and the investment side is the icing on the cake,” says David Kinney, publisher of the Hagerty Price Guide, one of the bibles of car collectors.
While Styles’s fleet has matured to include more valuable cars, the Delray Beach, Fla., entrepreneur sees himself and Samantha more as caretakers than investors. “It’d be nice to realize a gain if these cars ever leave us,” he says. “But if not, I’m okay with that. The primary benefit is that it makes me happy.”
How to get started. You don’t have to be super-rich to get into the classic-car market, but it helps if you have a pile of money to play with. You can find vintage Chevrolet Corvettes and Ford Mustangs for less than $30,000. But unless you are a do-it-yourselfer, you could pay a king’s ransom for restoration. Just the chrome on a 1950s-era Cadillac could cost $25,000, and a full restoration of most classics runs into six figures.
Start with makes and models you are interested in. Consider joining a car club to learn more about them and network with owners. Styles eventually focused his collection on convertibles with big engines; it’s rare to find that combination today. “Where rarity and desirability intersect, you have value,” Styles says. Case in point is the jewel of his collection: a candy-apple-red 1967 Shelby GT500 convertible that belonged to Carroll Shelby, famed automotive designer and race-car driver.
You can get an idea of what to pay from the Hagerty Price Guide (prices are also available at Hagerty.com). Collector car dealers can help locate what you’re looking for, or you can try an auction—but get someone knowledgeable to join you.
Besides the car’s looks, you need to know its history. Has it been well maintained? How many owners has it had? Has it been shown or won awards? If it has been restored, when was it done and by whom? Unless you have a lot of money, steer clear of cars needing bodywork.
What’s hot. As with any collectible, there are blue-chip examples of collector cars. Don Rose, car specialist at RM Auctions, says prewar classics, such as Duesenbergs, Packards and Bugattis, still have cachet, but postwar European sports cars are exploding. Ferraris are most notable for their recent run-ups in price (seven figures at minimum), but nearly anything Italian with some age on it is hot. Prices for Lamborghinis and Maseratis are likely to follow those for Ferraris fairly quickly.
German cars are rising in value as well. Porsche 911s from the late 1960s and early 1970s have spiked lately. One of the most iconic collector cars, the Mercedes-Benz 300SL, with its gullwing doors (hinged from the top of the car), has been in demand since its 1950s debut. Prices today top $1 million.
Muscle cars are among the most affordable classic cars. Although they took the hardest hit in the last economic downturn, values are returning to pre-recession levels.