Do American Muscle Cars Make the Best Investment?

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Investing in collectable cars isn’t only profitable, but fulfilling for many car aficionados out there.  Some classic cars can be picked up for relatively affordable costs and have the potential for tremendous gains. If you have the knowledge or resources to restore a classic to its former prestige then that will come in handy in adding value to a classic.

It is important to research the market and any car chosen to get all the facts. There are resources out there that track what you’ll be looking for. Not every single classic car out there is going to rise in value. Auction sales point towards what the general market sentiment is and the rising price of many of these vehicles. Auctions will help an investor gauge current trends.

An area of particular interest is the American Muscle Car. The value of muscle cars between 1969 and 1971 has been going through the roof the past few years. Cars as an alternative investment can offer tremendous profits and are one of the best alternative investments out there.

Muscle on the Rise

For the most part a lot of the money to be made with classic cars was Ferraris, Porches, and Mercedes. All of these brands have been hitting new highs and booming in the collectible market. For most of the time American muscle was lagging behind the competition.

Currently, muscle is back on the rise and doesn’t look to be going anywhere soon.  Smart investors know to check different classic car indexes before parting with their money and purchasing a classic.

One of the best places to see this is through Hagerty’s market trend index, a group of indexes that follow valuations and market trends for different groups of classic cars.

Muscle Cars’ index has long been surpassed from the likes of Ferrari, German cars, and general classic car markets. That is no longer the case as according to Hagerty’s market index, muscle cars have increased 8% over two subsequent periods.

Taking into account the last year, the muscle car market is also the strongest out of any other areas of the classic car sector. A few select cars have been fueling this growth as they have been recording large amounts of high sales in many auctions.

Dave Magers, CEO of Mecum Auctions, a company that specializes in holding car auctions has announced what some of these cars were and the prices they fetched. A recent car that was sold was a Plymouth Hemi Barracuda, also known as the (Hemi Cuda), it was sold for $3.5 million and an additional Cuda was sold for $2.5 million in a West Coast auction.

On the lower end of the spectrum are some cars like the Chevrolet Chevelle Yenko 427, 1969 that could go from $250,00 to $350,00 in an upcoming auction. Another addition in this year range is American racecars. The 1969 Chevrolet Corvette L88 Race Car Convertible is likely to fetch anywhere from $1 million to $1.5 million.

Continued Trend

In Scottsdale, Arizona the large Barret-Jackson car auctions are held that hope to sell rare finds and a variety of classics. There is an estimated $285 million worth of cars being sold at the auction.

One classic that is going to be sold off there is a 1970 Corvette LT1 coupe. This American muscle car has its original Marlboro maroon paint and only 19,900 miles on it. The car also comes with original paperwork and the flow of purchases in its history since 1970. This is essential for any would-be buyers out in the market.

Figures like these show that the market is not going down anytime soon and is only going to keep raising as more classics gain prestigious status and their prices keep increasing.

The market remains strong and is not showing any signs of slowing down. The past four years have been promising. This isn’t currently a bubble either because that is partly due to a lot of leverage. That has yet to be seen in the market. Muscle cars are joining the ranks of pre World War II cars and are getting high valuations.

Other Collectable Cars

The most expensive sales still come from mainly vintage European models. Muscle cars are selling from anywhere from the half a million dollars or as mentioned earlier up to a couple million.

There is also a new trend out there on catching somewhat modern cars before they become classics. A whole new generation of collectors and investors is entering this market and driving the demand up. There has been an increased interest from international investors.

Foreign investors who usually did not see anything in this market have been grabbing up whatever they can, sometimes not even seeing the car in person. Just as an investment tool they view these markets as highly profitable.

Market Investment Overview

The overall classic car market can be broken down into a few categories based on what type of vehicle the car is and price range. Usually the two go hand in hand aside from a few special cases.

$50,000 to $500,00 is on the lower end of the spectrum and there is a possibility for it to go even lower for some rare finds that require a good amount of work. A Dodge Charger or Chevelle can be in this range while something like a Mercedes Cabriolet would range from $250,00 to $400,00.

Half a million to $3 million is the price range cars before World War I and II are usually sold for. Classics like these include limited production models. Usually this price would include older cars like Lamborghini, Ferrari, and Maserati.

The big money comes at $3 million plus and can range all the way into the multi millions. An example would be Ferrari Spiders that can go all the way up to $50 million.

In order to reach types of price ranges that go up this much, there are many factors that go into the price. The first thing any investor or collector looks out for is fraud. They’ve got to make sure that the car is no misrepresented and is actually what it says it is.

Figuring out a car’s integrity can be done through inspections of the physical vehicle and solid documentation. If there is a long history of a car winning competitions or ownership documents it will help the valuation process.

Even though it is a collectable it’s good to keep in mind insurance coverage. Having the appropriate insurance is essential in owning one of these cars and should be factored into the investment strategy.

Taking these factors into account will then lead into the overall valuation of the car compared to similar ones on the market. There are a few different routes to take in regards to owing a classic as well.

A good way to look at it is the perspective between restoration versus preservation. There are a lot of old beat up cars out there that have the potential to be classics. The cars may have been sitting in garages for years and be seriously deteriorated and possibly unable to even run.

The type of work involved with restoration is going to include working on the overall physical look of the car as well as working on the internals. Parts will be replaced or added onto the car without ruining the integrity of a classic.

Preservation is on the other end of the spectrum and involves housing the car in a safe place away from the elements and keeping up the appearance and internals of the car. Think of it almost like a museum piece. Both of these avenues is going to require maintenance as well.

Depending on what needs to be done maintenance can either big a large cost or a small one. All of these concerns need to be factored into the investment, as it will not only cost time, but money.

Owning a classic is a rewarding experience and as the American muscle car gains more traction it will also be a solid alternative investment.

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Mike Colagrossi is an analyst at ActivistStocks.com covering activist investors and major deals at hedge funds. He also regularly contributes to SeekingAlpha.com and has a strong interest in alternative investments and emerging markets.