Classic Car Investment Funds

Classic Car Investment Funds – Such A Bad Idea

Wednesday, 14 September 2011 09:10

There have been several investment funds created lately for the purpose of investing in classic cars.

I believe that this is a very bad idea for those of us who own classic cars as drivers, racecars, show cars or just because we love them as objects of art. When professional investors get involved they think of the investment product as a commodity. Their goal is to buy low and sell high with profit the only purpose and they care not for the cars or the people who love these cars.

This will artificially increase the price of these classic cars. You may think this is good if you are selling but you will not like it if you are buying. But even if you are selling these professional investors want to buy low, remember?

I do not think of my special cars as commodities and I think this is not good for the classic car hobby because it will take some good cars off the market and maybe out of sight for a few years. And the goal is to drive up the cost of these cars so the fund can make a profit. This may put some cars out of the price range for the car enthusiast who wants the car for what it is, not because it represents a potential profit.

Let's not forget what professional investors have done to the worldwide economy and to oil prices, for example.

Classic car prices should be set by real market conditions based on supply and demand of collectors and car lovers, not by professional money managers who are focused on profits only. This will create an artificial demand that may increase prices at least until these funds shut down and then prices will likely fall. This could hurt the people who bought during these inflated price times.

When I sell one of my cars I want the highest price that another collector will pay and when I buy a car I want to pay the lowest price that the seller will accept. I do not want these prices set by professional money managers who do not care about cars except as a way to make money.

It is not clear that these funds will make money anyway. I especially do not believe that it is a way for car lovers to invest in cars. For one thing if one were to invest in one of these funds you would not have the pleasure of using the cars because they would be stored away waiting for appreciation.

So, my preference is to own the car so that I can use it as I see fit, weather that is to show, drive or race.

Let’s remember the classic car market problems caused by rich Japanese buyers in the late 1980s and the tulip market run up and crash a few hundred years ago. Let’s learn the lessons of history and not make the same mistakes again.

Read about some of these funds here, here and here. By Michael Gulett

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