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 In 2004, The Wall Street Journal and Dow Jones put together a
now-forgotten index to cars you should buy as investments. I'm
skeptical of such predictions, despite making them myself from time to
time: Dave's Law states that the more a collector car is worth, the more
it tends to appreciate. If you can afford truly expensive cars, you can
make money on them. National economies may collapse and get kicked out
of the Euro Zone, billion-dollar investment banks may disappear
overnight, but a car is a real thing that no stroke of a pen can
evaporate (legal issues aside).
The WSJ's picks, though, were mostly not high dollar cars:
there were many affordable, entry-level collector cars, heavy on
Seventies models. Just the sort of things we know well, with a few
oddballs or blue chips thrown in. So I thought it would be fun to look
at WSJ's predictions and see how they made out over the last
eight years. It appears they went almost exclusively by NADA values,
which makes it easy to track. As a baseline, I took the Dow Jones
Industrial average: The December 31, 2004, close was 10,783.01; the DJIA
closed out 2011 at 12,217.56, about a 22 percent return over the same
period, not adjusted for inflation, which has averaged around 2.5
percent since then. (I'm sure this is completely wrong, but writers
don't buy stocks, so what do I know?.) Any car that didn't beat the 22
percent mark fails outright as an investment, but I want to take into
account maintenance and upkeep. Seeing a 100 percent increase in value
on a $2,000 car over eight years is meaningless, as you'll have spent
more than that on maintenance; or if you've stored it, it's going to
need at least that much in work, and insurance in either case.
You begin to see why low-value cars don't make sense as an investment.
My personal rule of thumb here is that you'll spend $600 per year or 10
percent of the car's value over 10 years, whichever is greater. So add
another 10 percent to the 22 percent minimum rate of return to beat the
market: 32 percent. Of course you DO get the pleasure, unique to cars,
of using them, but as an investment you can only do that to a limited
degree, enough to keep the seals from drying up; otherwise condition
will start to play a factor in change of value over time.
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Re: Are You Smarter About Cars than the Wall Street Journal?
