“Your most unhappy customers are your greatest source of learning. ”
ON A PROMO FOR DISCOVERY HD THEATER'S Chasing Classic Cars, host Wayne Carini tells viewers, "I chase cars," his wry expression suggesting he has heard the one about the dog that chases cars but can't figure out why when it catches one. Unlike the dog, Carini has a shrewd nose for which cars to chase and knows exactly what to do with one when he runs it to ground. Carini's case of the car bug is about as virulent as Jay Leno's. But Carini's TV show has a ways to go to catch Leno's, and he continues to make his living by buying, restoring and selling notable cars.
Carini's rule of thumb is a simple, 80-proof distillation of advice for anyone considering the purchase of a classic car as an investment: "I look for cars that I'd like to own. I'm not a muscle-car guy. Always a sports-car fan. I have to like what I sell. If I'm not passionate about it, I can't sell it."
Some of his finds are for restoration of a specific model at the behest of a customer. He hears about others that, for reasons of scarcity or some less easily defined appeal, are too good to pass up and might eventually find their way into his personal collection. (When asked just how many cars he owns, Carini said only, "Too many, but never enough.")
The recession has changed the climate for classic cars as markedly as it has many other markets, said Carini, who has been buying, restoring and selling collectible autos for 40 years. "Prices for some cars-those regarded as B or less investment quality-are down 20 to 30 percent," he added, citing muscle cars and sedans with no racing history. Prices of newer exotic cars have fallen drastically, too. You can now buy an Aston Martin V8 Vantage with only four figures on the odometer, for example, for as little as $70,000, not far off half its price when new two years ago.
"The car market is like the art market," said Carini, who owns F40 Motorsports in Portland, Conn. "Really good rare paintings, rugs and furniture have not fallen off. It's the same with collector cars like old Bentleys and Ferraris. A Ferrari GTO was worth $10 million five years ago. Now it's worth $25 million, despite the recession. Instead of 10 to 15 top-notch spectacular cars, auctions now have maybe two. Owners are retaining them for when the market comes back."
As Ian Kelleher, CEO of RM Auctions, put it, "Investment-grade collector cars-rather than the market for cars driven by passion-still operate within their own bubble." Prices of muscle cars have bottomed out to some degree, Kelleher noted, but there are exceptions: "A Hemi 'Cuda went from $100,000 to $700,000 with no rhyme or reason. I swear, some of these guys [at auctions] just like looking at themselves later on TV with their friends and neighbors. Passion overwhelms good decision-making. A '71 Hemi 'Cuda convertible, one of 11 built, recently went for about $2 million. The buyer already had two of the 11 and wants to maintain their value so he bought a third. To him, that was not crazy thinking. But when a nondescript Camaro can fetch $150,000 you know the market will, at some point, take a turn for the worse."
Carini agreed: "The prices now being paid at auction for 25,000-production-run cars are a bubble that has to burst."
At a gathering in New York City recently, someone asked Kelleher, "What can I buy now for $350,000 that I can sell for $600,000 in two years?" Kelleher, who is six-foot-eight and admits he doesn't get to enjoy 90 percent of cars, didn't single out any sleepers: "Half of it comes down to preference," he said. "A [Mercedes 300SL] Gullwing is a beautiful car but it's cramped and hot, so the 300SL roadster has become more popular with people who found the Gullwing uncomfortable, and prices rose. But a Gullwing will always be an iconic design. A standout one now will fetch about $600,000, and a driver $300,000. Provenance, history and circumstances drive prices."
RM recently set a new car-auction record when the hammer went down on a 1957 Ferrari 250TR for more than $12.4 million. "It's not the most desirable Ferrari, but it's absolutely gorgeous," said Kelleher. Actor James Coburn's 1961 SWB Ferrari California Spyder was expected to fetch $6 million at an RM/Sotheby's auction in Maranello, Italy, in May last year, but a bidding war took the car to $10 million and it went to UK radio DJ Chris Evans. "Passion can overpower prudence," observed one auctioneer, but isn't that the whole purpose of an auction? "The viability of a car as an investment depends on the buyer-he has to be smart, he has to do his research and he must hire an advisor," Kelleher said.
VISITING CARINI'S F40 Motorsports is like walking onto the set of a familiar show. Over there, in a chain-link enclosure, sits the purple 1948 Davis three-wheeler (it looks like a bumper car) that was the quarry on a past episode of Chasing Classic Cars. To the left are a 1960s Abarth and a diminutive Fiat people carrier. And in there, on stands in a restoration building, is the Ferrari 365GT Daytona Spyder that Carini and customer Herb Chambers snagged by taking Chambers' Gulfstream G450 west to Denver to buy the car before anyone else could. Chambers owned (and survived the wreck of) the exact same car in his earlier days and was intent on owning it once again to complement his Daytona coupe.
Carini considers preserved low-production cars a better buy in this market than extensively restored cars. "It's an up-and-coming segment," he noted, citing his own 1954 Hudson Italia (one of only 25 built) as an example. "The car is completely original. 'Preserved' means the car is used, serviced, run and kept in good running order but not restored." Keeping a car in good running order extends beyond fluid, filter, brake and tire changes; it includes replacement of bushings and shock absorbers, for example. A well-looked-after original rare car in fine fettle makes up with gracefully aged authenticity what it might lack in dazzle.
The last big downturn in the classic car market was in 1989, recalled RM's Kelleher, "and it was brought on by speculators who weren't knowledgeable about the cars they were buying. The clientele now is much more educated, thanks to local car shows and the cable-TV shows." To discourage speculators, Ferrari decided in 1995 that it would restrict the F50 market by leasing the cars only to previous Ferrari owners, but lessees/speculators dodged this bullet by forming a company to lease the F50 and then selling that company to an F50 buyer willing to pay a premium for what was then Ferrari's top car.