Thursday, May 14, 2015

The Price of Entry

A 1966 Ford Mustang for sale in Santa Barbara
Price of Entry - PDFAn email just hit my inbox, detailing a 1966 Ford Mustang for sale locally. It shows its age through some cosmetic issues and has a few other shortcomings, such as its six-cylinder engine, worn-out front seats and – in the eyes of some – its padded black roof. But this would be an opportunity to own a cool classic car that would prompt thumbs-up from bystanders. The price of entry: $7,000. 

The timing is serendipitous, since it helps to illustrate the point of this column, which I’d already been working on. While “car people” may have a decent idea of the value of classic cars, the views of the population at large are skewed, generally in one specif- ic direction. The uninitiated tend to believe that the cost of entry into the classic car market sits much higher than reality. 

To get some hard data on the topic, I turned to Survey Monkey to craft a questionnaire that would quantify this phenomenon. I showed pictures of four different classic cars and asked what each person would expect to pay for each. To keep it simple, I only specified that the cars were in “good” condition. I then found the value for a Condition number 3 vehicle (“good”) at the Hagerty Insurance online valuation tool (www.hagerty. com/valuationtools). The difference in percentage terms was what I’ll call the overvaluation. 

I’ll admit to stacking the deck a bit in my favor. I mostly chose cars that I expected people to overestimate because of their looks or names, but which happen to be worth less due to their ubiquity or other factors. I also selected the base models of these vehicles, or at least the cheapest model I could find on Hagerty. 

Certainly, one can find hyper-expensive collector cars trading in the range of hundreds of thousands, or even millions of dollars. If you hang around Pebble Beach enough, you’ll start to think that collector cars are literally worth their weight in gold. But the point of this experiment was to demonstrate that the point of entry is not as lofty as most people think, so my focus was on cars that were both affordable and undeniably “cool.”

Incidentally, one cannot find a value for a six-cylinder ‘Stang from 1966 on that site, since I suppose it’s not considered “collectible.” But take that thing for a cruise down State or Cabrillo, and you’d still feel like a million bucks.

For a sample, I selected 12 of my friends who are decidedly not “car people.” They see me driving nice cars and they think they’re cool, but these people’s lives are consumed by many other things, cars not being high on the list.

While the deck was a bit stacked against them, I had no idea how skewed their perceptions would be. Let’s take a look at these cars one by one, ordered by how overvalued they were.

1974 Volkswagen Beetle
The first was a 1974 VW Beetle. By this point in time, the Beetle looked less classic and a bit more pedestrian, due to items like the headlights, fender lights, chunkier bumpers, and curved windshield, and the interiors suffered similarly from safety regs, but they still retained the essence of the original. While Hagerty puts a ‘74 sedan at around $7,600, the group thought they’d have to pay around $14,200 on average, with guesses as high as $50,000. That’s an 87-percent overestimation.

My friend Annie Huang had such a guess and gave some insight into her thought process.

“I was thinking, really nice cars that are new are usually $50K or up,” she said, “so I thought that older cars would be more, since they’re collectibles.”

Rose Knapp agreed: “I tend to associate anything classic/vintage/antique as something that gains in value as it gets older.” It’s an interesting thought, and it got me thinking about the fallacy of antiquity. Things that are old are often worth more, but sometimes you can get a bit detached from the starting point. 
 
The ‘74 Beetle started at $2,630, which is only about $12,500 in 2015 dollars. While from the perspective of someone who grew up in the ‘90s there aren’t many around, VW was still selling hundreds of thousands per year in the ‘70s, making it no surprise that these cars didn’t keep up with inflation. 

Fifty years from now, a 2015 Chevy Cruze might be considered pretty cool, since it would be a link with the past, but that doesn’t necessarily mean that it’ll be worth more than a few thousand space-bucks.

From there, things get much more extreme. Let’s take a look at the 1966 MGB, a car I actually owned until a few years ago. To me, this car is classically classic, a British Racing Green roadster with a lovely chrome grille and bumpers, wire wheels, fenders that rise beside a low hood to hold out circular headlights, and vertical taillamps. 

Formerly the author’s 1966 MGB Roadster
I actually showed a picture of my car in the survey. I took a bath on that car, selling it for $7,650 when the economy was not fully recovered. Hagerty says it’s worth around $11,200, which is a thousand above what I bought it for right before the economy crashed. My friends, on the other hand, figured they’d have to pay more than 35 grand, an overestimate of 218 percent, or more than three times its actual value.

This was the car that revealed to me that classic car ownership was affordable. Even with its legendary Lucasite reliability, I only sank about $1,700 into the car over four or five years of ownership. It certainly helped that parts were readily available from outlets like Moss. A side benefit: I also learned how to tinker on a car without fear that it would explode in my face.

Next on the list is a 1969 Ford Mustang. The styling morphed a bit from the original, making the car a bit chunkier and less graceful, but the headlights outside the grille remained – unlike the ‘70 model – and it’s still recognizable as a classic Mustang. Hagerty value: $10,500. Layperson estimate: nearly $38,000. Even a good-condition ‘66, the last year of the (mostly) original styling, can be had for just more than 15 Gs.

The Mustang is a legendary car, but Ford sold its first million in fewer than 18 months and went on to sell in the hundreds of thousands nearly every year until 2007. The ‘69 was actually the lowest-selling ‘60s model, missing the 300K mark by a mere 176 units.

A ‘69 Dodge Charger, on the other hand, which sold in significantly smaller quantities, would cost more than $30,000, even for a base V-8. Mopar fans looking for a deal could pick up a neutered Dodge Challenger from 1974, when the only V-8 made just 150 horsepower, for about $16K.

And that brings us to the final car, one so overestimated that you may need a floor jack to pick your jaw up off the cement. For 1976, the Chevy Corvette had recovered some of the power it had lost from its engines during the fuel crisis, but the L48 motor still had only 180 hp. And this was well into the urethane bumper days, when five-mph federal regs had stripped the ‘Vette, like many other cars of the era, of its classic-looking chrome bars. Still, the Corvette wore it well, and a ‘76 model still apparently looks expensive.

How expensive? Nearly 50-grand worth, according to the crew. The real value of this car is a shockingly low $8,800. They’d overcalled it by 460 percent. While GM called this car a Stingray, it doesn’t nearly hold the value of the original, two-word Sting Ray models (1963-67), the cheapest of which you can get for around $30,000 in good condition.

As some might expect, the men in the group – the survey takers were split evenly, six to six – had more awareness, averaging only 169 percent over versus the women’s 351 percent. It’s a big gap either way.

So, who got the closest? Jason Austin, a local farrier (he shoes horses), averaged only eight percent over. He attributed his relative awareness to “many years of looking at Trade Express.” He mentioned that he might have gotten even closer had he seen the “good” stipulation. But the fact is that he still overestimated the value of my MG by 56 percent after seeing a picture of the very car.

That car might be considered a “20-footer,” meaning that from that distance it looks pristine. Sure, you could pay a ton more for a concours-quality ride (for a “Condition 1” 1966 MGB Hagerty estimates you’d pay nearly $30K), but then you’d be afraid to drive it or park it anywhere it might get breathed on.

The point remains that classic car ownership is still a largely accessible proposition for many people who may not realize it. Clearly, there are other considerations, like time, garage space, and all the other things life might throw at you. But for me, entry into this highly rewarding world only happened when I finally realized it was possible. And now I’m here to spread the word. 

If you’re interested in a “well-maintained” 1966 Mustang, which spent its life in Santa Barbara, contact Jeff Paley at (805) 687-6173.

If you have a story about a special car or piece of car culture in the area, email Randy at rlioz11@gmail.com. Or follow him on Instagram @rlioz.

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