Passion Investments: Autos
Revered Racers
Michael Verdon
11/01/2004

Bob Coates races his 1974 Ferrari competition Boxer BBLM on summer weekends, often coaxing the speedometer past 150 mph. The Ferrari feels at home on the tracks at Watkins Glen or Pocono Raceway in New York. Coates’ beloved Boxer has an impressive racing provenance: It achieved fourth in class at the 24 Hours of Le Mans in 1977 and third in class a year later. “I have friends who think I’m out of my mind,” says Coates, president of Paramount Wire in East Orange, N.J., “but my car friends understand my passion. It’s not something you can explain. Some people live to go to fancy restaurants. I get excited about wax that makes my car shinier.”

JACK CROUL shipped his 1951 Ferrari 340 from California to Italy to compete in the Mille Miglia.
Jack Croul of Newport Beach, Calif., shares Coates’ zeal. The retired part-owner of Behr, the paint maker, owns more than 40 racecars. He bought his first—a 1934 Ford—in 1989 to compete in the two-week coast-to-coast Great American Race. Since then, Croul has primarily collected cars that ran in Italy’s most famous road race, the Mille Miglia. The Italian government halted the original Thousand Mile event in 1957, when a racecar careened off the road, killing the two drivers and 10 spectators. But in 1982, enthusiasts resurrected it as a 1,000-mile tour of the countryside, and allowed only authentic Mille Miglia cars, or the types that originally ran in it, to participate. For the past 11 years, Croul has shipped a 1951 Ferrari from California to Italy to compete; his best finish so far has been fifth. “I drive the coupe that won the race in ’51,” he says. “This year, my son also drove his car in it. It’s the thrill of a lifetime.”

VALUE JUDGMENT
Vintage racecars that once burned up the tracks of Le Mans and Daytona now command premium prices from avid collectors who value pedigree and speed. Though some caution that the market for such collector cars is overheated, aficionados argue that passion, not price, will only drive prices higher.
Thousands of vintage racecar owners share the driver’s seat with Coates and Croul. They view their classic cars more as objects of affection than high-yield investments. “I have stocks and bonds for that,” says Croul who, like many owners, admits to falling in love with his vehicles. Such love, however, does not blind them to their cars’ dramatic appreciation during the latest upturn in the collector racecar market: Coates believes his Boxer has doubled in value since he purchased it in 1993. “In some ways, the vintage racecar market is better than it has ever been before,” says Rupert Banner of Christie’s Motor Car Division in London, which recently held an auction of Le Mans racers. “Cars with the most colorful racing histories fetch the highest prices. As the values continue to increase, there is a growing new interest among noncollectors.”

Banner describes an international market in which owners, like Coates and Croul, are increasingly racing their collectible cars, rather than just showing off high-gloss garage queens that have not rounded a track in decades. “People go from country to country to attend the best rallies,” Banner says. “It’s a public experience—unlike collecting paintings and tucking them away in a vault. There may be some vanity involved, but there is also an element of pure enjoyment and pride that owners get from the cars.”

Reliving the Past
Before the early 1970s, old racecars held as much value as last Tuesday’s newspaper. “People used to say there was nothing more useless than last year’s racecar,” says Gerald Roush, publisher of the Ferrari Market Letter. “But then vintage racing took hold, and there was suddenly a great reason to own one.”

THE 1960 Aston Martin DB4 GT that Christie’s recently sold for $793,000 had a distinguished racing history, significantly adding to the value. (Photograph by James Mann/courtesy of Christie’s Images LTD.)
In 1974, Steve Earle founded the Monterey Historic Automobile Races, now considered the country’s premier vintage competition. “That year we expected a few racers and families,” Earle recalls. When 65 cars and more than 1,000 spectators showed up, he knew that he was on to something. Back then, even the most famous racecars were either scavenged for parts or ignobly relegated to junkyards. “One year after it was campaigned at Indy for $250,000, you could buy a car for $10,000,” he explains. “A lot of guys couldn’t do anything with the cars. Our event took the hobby out of the backyard and made it public.” Hundreds of regional and local clubs across the world now hold annual races. Earle’s Monterey event, held every August and now sponsored by Rolex, sells out months in advance. Since the first race, the number of classes has swelled to 15, from 1904 vintage racers through ’83 Formula One champs. “Four-hundred cars are about all the paddock can handle,” he says. “Even at that, we tend to be oversubscribed.”

Earle insists on authenticity; no replicas are allowed to race Monterey. “Having a real car makes a difference in how you drive it,” he says. “You will race it hard to a point, then back off. This is a gentleman’s sport. Nobody wants to wreck the other guy’s car.”

Certainly not if they intend to sell it at a profit later, says Keith Martin, editor and publisher of Sports Car Market magazine. Martin, like the other experts, confirms that values have been skyrocketing over the past three years. “A Ferrari 250 TR that won Le Mans sold for about $9 million two years ago,” he says. “It just changed hands for $12 million.” Ironically, the weekend warriors who race their vehicles in front of their collector peers and thousands of fans are doing little to drive up the value of their cars. “The fact that they are used as vintage racing cars now is irrelevant to their overall values,” he continues. “What’s more crucial is that they were important racecars in their period.”

Of course, most storied racecars do not fetch millions, but, in general, prices continue to increase. According to David C. Gooding, who runs Gooding & Co., an auto auction house in Santa Monica, Calif., the value of the Ferrari 275 GTB has risen by $100,000 in the past year to $300,000 (depending on the specific model). The 250 GT Lusso has doubled in value to $250,000 in two years. While Ferraris tend to be the leading indicators of the relative health of the collectible car market, many American-built racecars, such as the Ford GT40 and Shelby Cobra, are also faring well. “A 1964 289 Shelby Cobra that would have fetched $100,000 three years ago would go for $250,000 now,” Gooding says. “These cars were sleepers for years, but vintage racers figured out it’s one of the quickest ways to get around the track. If the engine blows up, you can always replace it with a cheap Ford V8—unlike Ferraris, whose matching engines are treated like the Holy Grail.”

1956 FERRARI 500 Testa Rossa. It was sold at a recent Christie’s auction. (Photograph courtesy of Christie’s Images LTD., 2004.)
Some aficionados worry that the vintage racecar market is becoming overheated. Roush recalls that in the late 1980s, nonenthusiast speculators pushed the price tags of preowned Ferraris into absurdity. “Almost anything with the word ‘Ferrari’ on it went up in price,” he says. “But many new buyers didn’t know a Ferrari from a Ford. We had a ‘greater fool’ theory. People would pay foolish prices believing there was a greater fool out there who would pay even more.” The curve reached its apogee in 1990, when a Japanese collector paid $16.5 million for a Ferrari 250 GTO. Three years later, he sold it for about $3 million. Industry experts currently value it at approximately $7 million.

High-Octane Assets
Roush believes the current market is actually much more stable because passionate collectors, rather than speculators, fuel it. He does, however, offer one caveat: “These are used cars, and all used cars depreciate until they become old enough or rare enough to be collectibles,” he says. “If you talk about a handful of 250 GTOs or 250 Testa Rossas, they are unique—but the exception to the rule.”

To provide a more judicious perspective on the sports car market, Martin’s magazine has assigned investment-grade values to different models. “At the top of the value equation are cars that have won races and can be authenticated,” he explains. “They are called ‘no stories’ cars because there is no question that they have the correct motor, bodywork and gear box.” The second tier features winning cars that have questionable histories—cars that often have been reconstructed from the original chassis, but without the original motor or other essential parts. “These are much more common, because if it was a successful car, it had to be run hard—and many crashed,” Martin says.

TOP: 1959 Ferrari 250 GT Long Wheelbase California Spyder. Bottom: 1947 Ferrari 166 Spider Corsa. Both were sold at a recent Christie’s auction. (Photographs courtesy of Christie’s Images LTD., 2004.)
He estimates that Grade A investment cars number between 5,000 and 10,000 around the world, and 50 come up for auction each year; another 200 change hands privately. Most Grade A cars have doubled in value since 2001, Martin says, and Grade B cars have seen asking prices rise by 50 percent. Martin’s website, www.sportscarmarket.com, also boasts a database of 40,000 chassis numbers and histories of different vehicles to help buyers authenticate cars. “The nice thing cars have that the art world doesn’t are chassis numbers and stampings on the motors,” he says.

Steve Tillack, who campaigns five vintage Formula One cars as well as 10 other vintage racecars, and operates a restoration shop in Redondo Beach, Calif., likens a vintage racecar to a racehorse. “You have to take it out and run it hard,” he says. “If you leave it in the corral, it’s going to rot.” As far as hoping for a financial return on his pastime, Tillack adds he would “put a line through the word ‘investment.’ The cars hold their value, but it costs money to race. The cost of running it will far outweigh the value of appreciation.” Tillack says that prepping a Formula One car for a race such as Monterey could easily run more than $10,000 for mechanics’ fees alone. There are additional fees for test time on local tracks to make sure the car is race-ready, plus transportation and support costs associated with the race. “ ‘Budget’ and ‘racecar’ should never be used in the same sentence,” he admits.

Despite such expenses, most devotees are upbeat about the vintage racecar market. “I think this hobby has a great future,” says Gooding, who has seen a spike in his auction business, much of it due to the popularity of websites such as eBay, which does a brisk trade in vintage cars. “Sure, there are better investments now, like real estate. But when is the last time you drove property around a racetrack at 120 miles per hour?”

Coates says he did not buy his Ferrari primarily as an investment, but he firmly believes he will never lose a nickel on it. “I just think of it as taking my money and making it less liquid,” he says. Coates recently received a purchase offer from Japan, where collecting has gained momentum. “It wasn’t enough to make me blink.”