Reality check: Determining of real value of your classic
If you’re reading this, then you love the collector car hobby. You like getting your hands dirty, road trips to nowhere, reading car magazines, and searching for parts for vehicles you don’t even own. Our cars are members of our families and they help us create adventures and memories that those outside the hobby (mostly) don’t understand.
These memories do come with a price, though. We’re not only talking about the cost of the vehicle, but the parts, maintenance, and insurance, along with any other care items needed. The truth is, most owners don’t mind spending money on their classics for one simple reason—it makes them feel good.
This, however, can be a double-edged sword because it’s very easy to drop a lot of coin in a short period of time if you aren’t careful. Plus, if that money is going into a vehicle with a low resale value, you could wind up taking a big hit on something that you originally viewed as an investment. I’ve seen it happen time and time again—someone dumps $40K into a classic only to find that it’s worth $25K when it comes time to sell. Some of this is due to not understanding markets and trends, but more often it’s because of an emotional miscalculation of expectations.
Paying for joy or dumping cash down the drain?
If, for instance, you’re purchasing your dream car and have no plans to sell it, then the amount of money you invest makes no difference—those are called “happiness payments.” On the other hand, if your plan is to purchase a car, enjoy for a short period of time, and then sell it, well then, that’s a different type of scenario entirely. Determining beforehand which type of owner you want to be is imperative, as you don’t want to get yourself into a financial bind.
If you fall into the latter category (enjoy and sell), then the investment/financial process starts right in the beginning with your choice of vehicle. The truth is that some vehicles will always be worth more than others. A 1963 split-window Corvette will always have a higher resale value then the nicest 1976 Corvette on the planet. This obviously has to do with desirability and rarity, along with what the car stood for at the time it was built. Thus, just because it says Corvette on the title doesn’t mean it’s actually worth what you hope it is (no offense to 1976 ’Vette owners).
Do your homework
This is where the education process comes in. First of all, watching the automotive markets from afar can be dangerous. We’re talking about auctions, reality shows, and Internet programs that can give prospective buyers an inaccurate depiction of a vehicle’s true worth. Rarely do these programs mention items like original purchase price, hours of labor spent on refurbishment, and then ultimately the final dollar amount invested whilst getting it ready for sale. As a buyer, you’ll need to research every aspect of the vehicle you’re purchasing, as different years and options will help to determine a realistic baseline value. After you’ve reached a decision you’ll then need to figure out if the money spent is coming from a rational or an emotional place. Emotional spending is OK if, in fact, you realize that from a financial perspective, it’s not the best way to go.
Case-in-point, I have a friend who some years ago purchased a 1975 Dodge Dart, a vehicle that on its best day is worth maybe $7K. It had just over 58,000 miles on the odometer, a bench seat, a 318 under the hood, and it was an exact copy of the one he drove in college. He paid $13K (WAY too much), and at the time he thought it was a deal due to a slight resurgence in the muscle car market. Visibly it was in nice condition, but mechanically it was tired. Shortly after the purchase he spent $2.5K on repairs and another $1K or so on dress up items (wheels and tires). He enjoyed the car and kept it for two years until the need for a down payment on a home forced a sale. The car had accrued only about 1500 additional miles. It was listed for an optimistic $15K, and after months online he couldn’t understand why there were no bites. Reality set in and upon doing some research; talking to friends, and viewing some actual sale results, he finally came to grips with the true value of the car.
He eventually sold it for $6K and absorbed a $10,500 loss.
So what went wrong?
First and foremost, the owner rationalized his purchased through a thought process that was based around emotion, not logic. It kept him from conducting the proper due diligence prior to the purchase and then encouraged him to spend more money once the car was obtained. Normally I wouldn’t have a problem with this if the vehicle in question were of the caliber to generate a return on the investment. When the wrong car is purchased out of the gate, well then it’s just a no-win scenario.
Another misstep in the process was the lack of a PPI (pre-purchase inspection), something that should be done on any used vehicle regardless of the year. Not only can the information obtained during this process be used as a negotiation point, but the prospective owner would then be aware of what maintenance was actually required to keep the car in good shape. And while old cars are much easier to work on than newer vehicles, if you are not mechanically inclined, costs can add up quickly if someone else is doing the work for you.
So how do you find out the true value of a vehicle?
While there is no concrete step-by-step list, there are certain resources both buyers and sellers should be aware of. Before you start this you need to understand that a seller’s job is to get the most money they can out of your pocket, while the buyer’s is to part with the least. Therefore going into a negotiation with the right ammunition is of the utmost importance. There are many tools out there to help you determine the value of a car. Hagerty Valuation Tools, for instance, were created for just this purpose. Here you can enter the year, make, and model of a vehicle, and based on truthful answers to the questions it will generate values based on information collected from past auctions, online sales, private sales, as well as market conditions as a whole.
Websites such as eBay and Bring a Trailer are also wonderful, as they give you the ability to see exactly what vehicles were sold for by searching through the results section of the auctions. Remember, there is a big difference between the asking price and the actual sale price. Just because an exorbitant number is attached to something, that doesn’t mean it’s worth it, and it’s up to you to determine this. A final piece of the puzzle is a personal inspection, and for vehicles with a substantial dollar amount attached to them this is a must. PPIs are great, but technically you don’t have to be there to have one done. With a personal inspection you can see, touch, smell, and drive a vehicle, and nothing—I repeat, nothing—is a substitute for this. It also gives you a chance to interact with the buyer/seller. This is invaluable, as meeting an individual in person will give you a feel for their honesty, and if ultimately you want to do business with them.
You’ve now been given some insight in regards to determining the value of your vehicle. For some, the realization of what their vehicle is actually worth—as opposed to what they thought it was worth—is eye opening. In general, most initial estimates are off by a margin of around 20–25 percent. That means if you think you have something worth $50K, in actuality it’s probably more like $38K–$40K. The caveat here is that a well-maintained and honest car will always fetch a premium as compared to others on the market.
Selling: Is there any profit?
As an owner, you know your vehicle better than anyone. You know every squeak, rattle, and leak, as well as how it was maintained through your ownership. This is where the honesty part comes in. As a seller it’s your duty to represent your vehicle in the best way possible. That means disclosing any mechanical or electrical problems, paint or interior issues, and any damage that may have occurred prior to or during your ownership. Not only will this give prospective buyers a sense that they’re dealing with the right person, but it also helps to justify your asking price. Things like service records, extra parts, build sheets, and manuals should all be disclosed at this time. Remember, the goal is to make someone who you don’t know pay you a substantial amount of money for an object you’re currently in possession of.
The second part of the equation has to do with you being honest with yourself. After you’ve done your research and made a determination on the value of your vehicle, don’t go out and ask 40 percent more than everyone else on the market. Do that and good luck selling it in a timely manner. Conversely, if modifications have been performed that you feel justify a price increase, then make sure to back up why you feel that they add value. In short, don’t overpromise and underdeliver—buyers hate that.
Now it’s time for the tough part, dealing with the public and selling the vehicle. If you have ever bought a new or used car, then you know the first thing any prospective buyer is going to do is haggle. You need to think about the questions you would ask the seller and then figure out in great detail how you would answer them. Buyers don’t care about how many hours of labor you’ve invested or what kind of sentimental attachments you have. None of that makes any difference. The only thing they care about is if it was represented correctly and if you’re asking a fair price. Deliver on those fronts and you should be in great shape.
Trust the process
We all partake in this hobby because in one way or another it brings us joy. We get to interact with great people, pilot some amazing machinery, and at days end preserve our own little pieces of rolling history. And while most of the old sleds we drive do have some type of inherent value, we need to be honest with ourselves in regards to why we own them.
If you’re goal is to make money by buying and flipping, then I hate to say it, but I believe you’re in it for the wrong reasons. If, however, you want to experience and own, while channeling your inner David Wooderson as you cruise in your own version of Melba Toast (Dazed and Confused—look it up), then bless you, because I think you’re doing it right. And hey, if you should end up making a bit of coin because of your ride, then more power to you. Personally, I think if we can own, enjoy, and share these amazing machines over time, and still get a fair price, then we’re all in good shape.