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(ARA) - With all the ups and downs there've been on the stock
market lately, investing isn't as fun as it used to be. Stocks are worth just a
fraction of the value they held in the late 1990s, money market accounts are
earning less than two percent annually, savings accounts about half-that.
People have gotten tired of watching their life savings dwindle away, so they're
shying away from the financial industry and turning to other avenues for making
money. Instead of dealing with the stressful ups and downs of the stock market,
they are focusing on investments that both have a good chance of going up in
value, and make them happy. Among the more popular options these days -- real
estate, artwork, and collectible cars.
Thanks to low interest rates and a higher demand than supply for housing,
there's been a real boom in real estate values across the country in recent
years. People are buying homes that need a little fixing up, investing a little
time and money on them, and then getting a big return on their investment.
Art lovers are cashing in too. They are spending record amounts of cash on
paintings, sculptures, photographs and lithographs that strike their fancy,
particularly by new emerging artists; and then turning around and selling them
when others discover the artist and the works become "hot."
Another avenue of collecting that's become especially appealing to investors in
recent years is investing in collectible cars. "They (collectible cars) are
extremely popular right now, particularly among baby boomers born in the 1950s
and 60s, who have reached a time in their lives when they are nostalgic for the
good old days, and now have the money to buy the car of their dreams," says Rick
Carey, the Auction Editor for Car Collector Magazine. "Classics are definitely
going up in value. I know this from following sales trends at auctions." |
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Carey attends about 25 collector auctions a year all over the United
States and says big-engined Pony Cars (Mustangs, Camaros, Barracudas and
Challengers) and American Muscle Cars are the hottest segments. The Dodges
and Plymouths of the late 1960s and early 1970s with Hemi engines, and the
1970 and 1971 Chevelle SS 454s are also getting a lot of attention.
If you bought a 1970 Chevelle SS 454 LS6 Hardtop at an auction in 1999,
Carey says you would have likely paid around $17,100 for it. He points out
that a comparable vehicle sold for $42,135 at auction in 2002 and for
$71,280 at auction just two years later.
The price jump is more significant in a 1970 Plymouth Hemi ‘Cuda. In 1998,
a well-maintained vehicle sold for $59,535 at auction. Just six years
later in 2004, a comparable model went for $159,300.
"These numbers are impressive, yes, but before you run out and buy a
classic as an investment, remember that few investors will succeed in
identifying the next fad. The safest and likely the most satisfying
long-term course of action is for collectors simply to buy what they
really like. A positive financial return on the investment is just icing
on the cake after pride of ownership, use and preservation," says Carey.
Once you have the collectible car of your dreams, it's a good idea to
properly insure it. Adding your classic on to the family auto policy may
not be the best idea, because in the event of loss, the vehicle's value
would most likely be determined on an "Actual Cash Value" basis. Typically
this is defined as "replacement cost minus depreciation" -- not a smart
way to insure cars that tend to appreciate in value!
Agreed Value coverage is the better way to go and is available through
collector vehicle insurance providers such as American Collectors
Insurance of Cherry Hill, NJ. Agreed Value coverage pays the full insured
vehicle value in the event of total loss, and is often sold with a zero
($0) deductible.
Not all vehicles qualify for collector insurance, says Jill Bookman, CEO
of American Collectors Insurance. Classic cars, trucks & motorcycles must
be older -- at least 15 to 25 years old for most programs -- restored or
in good original condition, garage-kept and driven on a limited, "pleasure
only" basis.
Collector vehicle value may be established a number of ways:
1) Purchase price (if recently purchased)
2) Reference manuals (e.g. collector car pricing guides)
3) Professional appraisal
The information needed for the application is much the same as for a
standard auto policy: name and address of the insured; number of drivers
in the household; year, make, model and VIN number of the vehicle; and
whether the driver has been involved in any accidents. The insurer also
needs to know the value placed on the car and the number of miles on it.
If the car is kept at a separate storage facility, the garage's address is
also needed. So are pictures of the vehicle.
For more information about collectible car, truck, and motorcycle
insurance policies, log on to AmericanCollectors.com.
While no financial advisor would recommend buying a collector car over a
municipal bond, Bookman notes, "All our customers would say ‘Life is short
and you can't cruise town with the top down in a municipal bond!'"
Courtesy of ARA Content
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