Taking wild ride with classic cars

ROCKY ROAD? Leon Kayarian, owner of Celebrity Classic Cars, with a 12-cylinder 1938 Packard limousine once owned by Doris Duke. He says investing in classic cars is becoming more popular. / PBN PHOTO/DAVID LEVESQUE
ROCKY ROAD? Leon Kayarian, owner of Celebrity Classic Cars, with a 12-cylinder 1938 Packard limousine once owned by Doris Duke. He says investing in classic cars is becoming more popular. / PBN PHOTO/DAVID LEVESQUE

When penny stocks and mutual funds lose their luster, some investors put their money into something shinier, like a meticulously restored 1916 Crane Simplex Torpedo Runabout or a 1971 Dodge Superbee.
Once the province of gearheads and hobbyists, classic-car collecting has entered the investment world as an alternative to paper assets and traditional physical assets such as rare coins, stamps or precious metals.
The market for many classic rides took a dip with the rest of the economy during the recession, but major collectors and dealers say investors from Asia and South America are likely to ignite a rebound.
“Classic cars as an investment are becoming more popular,” said Leon Kayarian, owner of Celebrity Classic Cars in Cranston, which reopened a showroom in the former Dayton Tire building this year. “The Chinese now are not buying soft investments, but they are looking for old cars and newly restored cars. They will pay $3 million for something if it is what they are looking for.”
The popularity of car collecting as a hobby and the steady proliferation of vehicle auctions in recent decades have expanded the market and made entry into it easier for amateurs.
“What is happening is people who don’t know that much about it are using the auctions as guidance, because they figure if Joe Blow bid $50,000 on something, they know it’s worth at least that and they will bid $52,000,” said Dick Shappy, owner of Dick Shappy Classic Cars in Providence.
But while the enjoyment of owning vintage wheels packs a more visceral thrill than shares in an oil company, local wealth managers describe classic cars as risky investments best explored with disposable income.
“We look at it as a volatile market and a very targeted market, where if you don’t know what you are doing, you can get in trouble,” said Peter Boss, business-development manager at WhaleRock Point Partners LLC in Providence, about the classic cars.
Boss, who was a professional race-car driver before getting an MBA and owns a 1965 Porsche 356, appreciates the appeal of collecting and the potential value of vintage vehicles, but doesn’t often steer clients toward them. “There are so many nuances to it, so putting it as a retirement investment is something we wouldn’t consider,” Boss said. “Many of the people who have made money in classic cars are looking for something special and have found it. You kind of have to have a love for it and want to be a part of it.”
Like other collectables, classic-car investing comes with a set of costs and variables that don’t apply to traditional paper assets.
Assuming that a vehicle being purchased has already been restored, the most obvious direct costs are storage and maintenance, which can be steep even if you already have garage space.
In addition to the market risk of any investment, cars also face the constant threat of theft or damage.
And then there is the unpredictability of markets rooted in the shifting winds of taste and fashion.
A decade ago, the popularity of American muscle cars of the 1960s and 1970s soared, presumably driven by investor nostalgia for their first set of wheels.
But more recently those vehicles have taken some of the biggest hits in value, while older European sports cars have become more popular.
While the rarest old cars hold value based on scarcity, much of the market shifts on more elusive traits attached to each vehicle’s current allure, provenance and even color.
Kayarian said he knew a collector who owned several expensive cars, but would only consider vehicles in bright red, a shade others find garish or clichéd.
Although the number of vintage-car auctions has surged in recent years, liquidity is also an issue.
Unlike cashing in stocks, a car investor who needs to sell must find a buyer interested in the particular model in question.
“Liquidity would be one of the biggest issues you would have,” said Dan Legault, senior financial adviser with Strategic Point Investment Advisors in East Greenwich. “Maybe you have a great classic car, but if the economy isn’t doing well and people aren’t spending, it could be difficult to get what it is worth.”
Strategic Point has a gold fund for investors who want to diversify, but nothing that includes classic cars. Legault said he knows people with sizable holdings of a number of collectables, from guitars to pottery, but he wouldn’t advise a client to put more than 5 or 6 percent of their assets in something like that.
Adding to the liquidity and volatility issues, Legault also pointed out that collectibles aren’t treated as favorably in the federal tax code and typically don’t provide an income stream like other assets.
Shappy said right now the market is down and he is looking to scoop up some undervalued vehicles before things take off again.
“It is a buyer’s market and the only way I keep making money is keep buying, because I can’t make money from selling right now,” Shappy said. “Some of the cars at the high end are holding their own, but haven’t appreciated too much. But those doing well are very rare.”
The buyer’s market Shappy describes and the number of cars he has purchased from distressed sellers at half the price they once paid points to how easy it is to get burned.
“The generation that got hit the worst was Generation X,” Shappy said. “They were into these muscle cars of the 1960s and 1970s. We never felt that these cars should command the prices they were – they only cost $4,000 when they were new. They took a beating.”
At Celebrity Classic Cars, Kayarian thinks classic cars can generate an income stream and works to lease them to hotels, wedding locations and function spaces as a visual draw.
For all the costs and risks, classic cars have historical, emotional and entertainment benefits that traditional investments can’t touch.
Kayarian reopened the Wellington Avenue showroom he first used in the 1970s, but this time around is targeting a global market with social media and email marketing.
His pitch to potential investors asks them to remember the first car they ever owned and then figure out what it would be worth today in mint condition.
“When you ask someone about their first car they start to smile and they will start talking,” Kayarian said. “We make it possible to bring back memories. The difference is you can’t drive an oil stock. We ask people: why don’t you have some fun?” •

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