Dan's Papers - June 13, 2008 - Classic Cars By Bob Gelber

Let me blow my own horn. Several years ago I predicted that the big three American car companies were putting themselves out of business by concentrating on the production and sale of large vehicles and ignoring the development of small cars. Last year I predicted that gasoline would be four dollars a gallon by this summer. Optimistic me. Some analysts are predicting it could go to five dollars if the price of crude keeps going higher. I'd like to make one more prediction, which, frankly, scares me. It's what I call an automotive finance crisis, similar to the home mortgage crisis that has devastated the economy. People have been walking away from the mortgages on their homes because they can no longer afford the higher interest rates. What if people begin to stop payment on their car loans and leases for their gas guzzling SUVs and minivans because the cost of running them is prohibitive and no one wants to buy their gas hogs right now?

People who want to trade in their big vehicles, or are trying to sell them privately, are receiving offers by dealers thousands below book value or having no luck whatsoever with private sales. Many families are in way over their heads. Leased car or not, owners of gas guzzlers are in trouble when it comes to recouping a fraction of what their car should be worth if gasoline were cheaper. Nobody saw this coming. What this means is that eventually every financial institution will probably end up owning thousands upon thousands of SUVs and minivans that nobody wants and millions of Americans will see their high credit scores wiped out. I hope I'm wrong about all this, but it could happen.

If you haven't figured it out yet, now is not exactly the right time to invest in a fuel hungry vehicle. If you do you are either very rich or a masochist. These vehicles are not exactly what I would call a great investment. The only positive aspect of the current economy is that the actual cost of collector cars seems to be softening. Now that's heartening because, over the last few years, collector car fever raised the value of some cars that are just not worth the money.

My formula has always been that if a car was desirable when it was new, it would, and should, retain its value thirty to fifty years later. This has certainly not been true when I see some of the junk that gets passed off as a collector car and actually sells for big bucks. Until recently, truly important cars like Mercedes Gullwing coupes and Jaguar XKE coupes were undervalued. But when cars like a restored Dodge Super Bee muscle car go on the auction block and actually sell for fifty or sixty large ones, I start to wonder about the sanity of buyers. Cars like the Super Bee were unimpressive when built, and, as far as I'm concerned, are the same now.

Take my advice and do not make a bad investment when it comes to either new or old vehicles. Of course you are going to lose money on a new car, that's called depreciation, but if you are buying a collector car, buy something that you can resell for at least the same price you paid for it. I'm not talking about under $20,000 collector cars, pocket change in the serious collector car world. Any collector vehicle that costs over, say, $40,000 and up (way up) should be considered a serious investment. If it's old and costs more than a decent new car, think about what you're getting into.

Recently, I received an email from a reader who asked my advice about purchasing a vintage 1955 $35,000 Austin Healey. I advised him to, above all, drive the car. I love the look and sound of old British sports cars, especially the 4 cylinder Healey, but they ride rock hard, are not that fast, have hot cockpits. The Healey has a particularly low-slung chassis. After all, he may not like the driving experience. I recently heard a story about a Ferrari owner who just purchased a vintage Aston Martin and was very disappointed in the truck-like handling. Whether it's a '55 Chevy or a '39 Ford, drive the car. Many drive and handle like your father's Oldsmobile, not your new BMW. There's an old saying that claims, "The rich know what to buy." If indeed that's a truism, then we will all soon see smaller, more fuel efficient vehicles cruising around the Hamptons. But, when there's a car show happening, all the collector cars will come out of their bat caves.

Bob Gelber, an automotive journalist living in the Hamptons, appears regularly on television as an automotive expert. You can email him at bobgelber@aol.com