Pitfalls and Profits of Collecting Cars, Wine, Art

(Image credit: © Jeffery Salter 2014)

published 30 June 2014

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%.

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Arondoski, of Grosse Pointe Park, Mich., whose day job is restoring cars produced before World War II, focuses on hard-to-find furniture made about the same time: the late 1920s and mid 1930s. He sometimes spends hours flipping through old magazines, taking note of the furniture in the ads. Next, Arondoski scours the Web for pieces he has identified to see whether they’re hard to find. If so, he knows that they’re worth scooping up.

For example, Arondoski discovered a Walter von Nessen lamp made between 1928 and 1932 on eBay for $850. He suspected that it was an original because he’d seen its picture in a magazine, but the designer’s signature was on the inside tier of the base, meaning he’d have to take it apart to verify its authenticity. His hunch paid off. When the lamp arrived, Arondoski removed the outer layer and uncovered the original markings. “It takes a keen eye and a certain level of risk,” says Arondoski. He has held on to the lamp and estimates that it’s valued somewhere between $25,000 and $35,000.

How to get started. Anybody can list a hand-me-down desk as an “antique” on Craigslist or eBay, but truly valuable items are tough to find. Successful collectors avoid the bottom of the barrel, focusing on the high-end and the rare. “You should buy the best that you can afford,” says Neil Ingber, an antiques dealer in Connecticut. If a must-have item is pricey, dealers will typically work with you to pay for it in installments.

To develop a sense of what’s high-end and what’s overpriced, you need to get to know the furniture market. “Nothing beats hands-on experience,” says Dan Farrell, an independent appraiser and art adviser for Antiques Roadshow. Head to garage sales, flea markets and auctions to scope out the offerings. Ask antiques dealers questions about their products so that you can build knowledge before building your collection. Arondoski’s collecting “started as decorating my home and escalated,” he says.

What’s hot. Styles of antiques go in and out of fashion, with fluctuating prices to match. Certain standbys, such as glass-shaded Tiffany lamps, have maintained their value. Mid-century modern, as well as the style that Arondoski collects, is big. Other periods, such as 18th-century and Victorian-era furniture, have fallen out of favor. “The very top end, the very expensive pieces, are doing just fine, even appreciating in value,” says Farrell. Demand for lower-end antiques “is dying on the vine,” he says.

Talk to gallery workers and research promising artists by reading show reviews and clicking through their Web sites. Ask yourself whether a young artist has staying power and whether he or she is serious about art as a career. “Buying art is like buying a stock,” says Alan Bamberger, author of The Art of Buying Art. “You want to read the company’s annual statement before you buy any shares.”

Benvenuti now has a 2,000-bottle collection that fills a room customized for wine storage in his Newport Coast, Cal., home. Benvenuti, the chief operating officer for a chain of beauty schools, has bottles that have appreciated tenfold, but he doesn’t trade his wine for profit. He sells parts of his collection when he runs out of space or his tastes change. For example, he started collecting Bordeaux and California cabernet sauvignon, but he now prefers Burgundy and pinot noir. His axiom: “Buy what you like and share it with friends.”

Peter Meltzer, auction correspondent for Wine Spectator and author of Keys to the Cellar: Strategies and Secrets of Wine Collecting, recommends establishing a relationship with a wine merchant who can help assemble mixed cases to both cultivate your tastes and see which wines you want to acquire by the case. You can also buy at auction; Sotheby’s and Bonhams have wine specialists and run auctions January through June and September through December. Wines sold at auction tend to be the finest or rarest vintages.

Commission. It’s common practice to use a merchant, broker or auction house to buy or sell (though cars are usually bought and sold directly). If you buy through a broker or at auction, you may pay less than you would from a merchant who charges retail prices—but then fees come into play. Auction houses charge a buyer’s premium of about 20% of the winning bid (10% for cars). You typically sell to a broker (at wholesale) or at auction, where seller’s fees are on a sliding scale depending on the value of the item and how much work has to be done to prepare it for sale.

Paperwork. Documentation on a piece’s provenance (where it has been and how it has been stored, if it was owned previously by anyone famous, and whether it has been published, exhibited or sold at a major auction) helps determine its worth and whether it’s the real deal. Save receipts, certificates of authenticity, images of the piece and records of how it was cared for. This will help if you need to make an insurance claim, you decide to sell, or you leave part of your collection to your heirs.

A rider may add perks, such as a zero deductible, coverage for breakage and mysterious disappearance, and reimbursement for claims at replacement cost rather than at actual cash value. Riders aren’t terribly expensive; to cover a wine collection with a Chubb policy, for example, you’ll pay 42 cents per $100 of value. Insuring a classic car costs about one-third of the cost to insure a new vehicle—$600 to $700 a year for a $100,000 car.

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Anderson has been with Kiplinger since January 2004, when she joined the staff as a reporter. Since then, she's covered the gamut of personal finance issues—from mortgages and credit to spending wisely—and she heads up Kiplinger's annual automotive rankings. She holds a BA in journalism and mass communication from the University of North Carolina at Chapel Hill. She was the 2012 president of the Washington Automotive Press Association and serves on its board of directors. In 2014, she was selected for the North American Car and Truck Of the Year jury. The awards, presented at the Detroit Auto Show, have come to be regarded as the most prestigious of their kind in the U.S. because they involve no commercial tie-ins. The jury is composed of nationally recognized journalists from across the U.S. and Canada, who are selected on the basis of audience reach, experience, expertise, product knowledge, and reputation in the automotive community.