Last year at the annual classic car auction in Scottsdale, Ariz., a 1955 Mercedes-Benz 300 SL Gullwing sold for $4.2 million ($4.62 million with the auction house premium). It fetched such a high price because it was one of only 29 made with an aluminum body.
Once you own one of these cars, the costs start to mount. For many investors looking for a bargain, restoration is a big expense. Curt Ziegler, an investment adviser in Denver, said he bought a 1956 300 SL Gullwing in 2006 for $500,000. The previous owner had done a complete restoration, he said. Now, that restoration would cost $450,000 to $500,000.
Then, there is the insurance. Jim Fiske, the United States marketing manager for Chubb Personal Insurance, said classic cars were an asset that people could generally insure for what they believed it was worth, within reason.
“If I bought a car for $500,000 and put $400,000 into it to restore it, then we’ll insure it for $900,000,” Mr. Fiske said. “Of course, if someone comes in with a 1979 Volkswagen Bus and they want to insure it for $250,000, we’ll say, ‘Why?’ because it’s only worth $10,000 to $15,000 and you couldn’t spend that much restoring it.”
But insurance does not cover these cars on the racetrack, a distinct subset of the collecting hobby. Henri David Jr., a retired corporate banker in Old Saybrook, Conn., races his 1949 Hillegass Sprint Racer in classic car races at Lime Rock Park in Connecticut.
“In top gear, the engine hits 4,000 r.p.m.’s, which is about 100 miles per hour,” Mr. David, 72, said. To race, he has to don a helmet and goggles and strap himself into the open driver’s seat — something he happily demonstrated at the Greenwich show.
Collecting at this level is also intensely social — something that makes it more expensive still. Mr. Marano said he liked to go to the Pebble Beach Concours d’Élégance each year but it cost him at least $12,000 to send one of his cars to the show — and that was if nothing went wrong.
Mr. Ziegler, who just returned from a car show in Monaco, said the racing and even the driving of these cars made it difficult to treat them like regular collectibles.
If they are being driven, they also are taxed at the higher ordinary income tax rate when they’re sold, not the collectible rate like a piece of art. But the biggest issue is what a collection is worth, for both insurance and estate planning. “You’d be shocked to know the people who have owned these cars for 10 years and have them woefully underinsured and don’t know the value of them,” Mr. Ziegler said.
And then, you have to figure out what to do with them. Nancy LeMay’s husband, Harold, had collected more than 3,300 cars by the time he died in 2000. (It was later winnowed to 1,500 or so.) She said the couple started a museum in 1998 because they had to figure out what to do with so many cars. “If we divided our cars up, each of our kids would have had 500, so that was unreasonable,” she said.
But it took 12 years and $65 million from fund-raising to create LeMay-America’s Car Museum, which opened last weekend in Tacoma, Wash. David Madeira, chief executive and president of the museum, estimated that the LeMay collection was worth $100 million today and said that 770 of the cars were destined for the museum. That still leaves the fate of hundreds of cars to sort out.
While this certainly shows the investment potential of cars, it also shows the big downside of collections: what do you do with them when you’re gone?