The Collector Car Game - If You're in it for the Money, Your in it for the Wrong Reason

I saw it the for the first time, back in the late ‘70’s, while reading the Advertiser.  It was your typical ad for a used ‘75 Trans Am, except it also included the words “Stored Winters”.  I was immediately suspicious.  Although my friends and I, had long suggested that this would be an ingenious way to preserve a car, we knew that it was not practical for most people.  You couldn’t possibly get a satisfactory return on your investment.  Not when you consider the cost of storage, and owning, licensing, insuring, and maintaining two vehicles.

A brand new 1975, Pontiac Trans Am, sold for about $6000 or less.  In order to maintain the same value in real dollars, today that car would need to fetch about $26,000, and that’s not counting any of the costs of ownership.  If you are being realistic, it’s damn hard to own a car for less than $1000 per year (even if it’s all bought and paid for), but let’s assume (for the sake of easy figuring) that since 1975, you could have done it until now, for an average of $1000 per year.  That’s an extra $39,000 you would had to add to the price of the car, but we’re not done yet.

You have to consider the opportunity cost of the money spent owning the car.  This will give you an idea of what might be.  Instead of buying a car, let’s say that you contributed money each month to an interest bearing account that would be worth $40,000 at the end of 40 years.  At 2%, the amount of interest earned would be about $14,000.  So, in order to even come close to breaking even on your 1975 Trans Am, that you stored each winter, you would have to get about $79,000 for it today.

$26,000 - the original purchase price in today’s dollars, plus
$39,000 - $1000 spent per year, owning the car
$14,000 - the opportunity cost of money spent on a car for 39 years, instead of investing it.

$79,000 for a 1975 Trans Am.  That’s not gonna happen, especially, if you ever drove the car.

This is good news for everyone kicking themselves in the ass for not keeping the classic car they once owned, but bad news for anyone with collector cars, just sitting around, hoping they’re going to pay their retirement.  If you once owned a brand new 1975 Trans Am, but regret not keeping and preserving it, take heart in the fact that it is much less expensive to just go out right now and buy one from someone who did.  About $64,000 cheaper.

The point here is that cars were meant to be enjoyed.  Have fun with the one you have, or if you can afford it, go out and buy the one you always wanted.  A car like the ‘75 Trans Am I used in this example should bring you at least $1000 worth of enjoyment each year.  If it doesn’t, you should consider getting rid of it.  If it does, then after 15 years or so of owning it, you can say that you came out ahead, even if you end up just giving it away to a child or grandchild who loves cars as much as you.  Passing the passion to the next generation may just be the greatest value of all.

1 comment:

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