What's Undervalued in Today's Market

Romanosky Automotive Weekly Gazette

The Jaguar XJS: Savvy buy or financial immolation?

What's Undervalued in Today's Market?

The valuation of any collectible is a function of two basic things: desirability and rarity.

There are lots of very rare cars that nobody cares about and are not worth anything. If nobody bought one when they were new, and nobody cares now, there is little chance of the car appreciating in the future.

For the very desirable cars, production volume holds back value. When the price starts to increase, more cars come to market which lowers the price and an equilibrium is reached. If there are more than enough cars for anybody who wants one, in most cases the car's value is capped at the restoration cost.

These days professionally restoring a simple car from a good donor costs at least $100,000. A more complicated restoration can easily be $250,000 - and that is if you can find somebody to do it.

Examples of iconic classic cars that were produced in relatively high numbers include the air cooled Porsche 911 (443k), Jaguar E Type (72.5k) and Mercedes-Benz 230/250/280SL Pagoda (49k). Providing you start with the right example i.e. right year, spec etc., these cars are now worth the cost of restoration. If you can find a well-restored, or well-preserved example of one at less than the cost of restoration, it is likely a good buy. Because of the number out there, the value is capped by the cost of a restoration because the car can be easily duplicated. So these cars can be solid buys, but not something that is likely to spike in value - if the market is rational, which it not always is.

They made over 800,000 of these W126 Mercedes-Benz S Class sedans and another 75,000 Coupes. Many have enjoyed pampered lives and are a bargain today. Practical too - I drive mine everyday!

Many classics won't sell for anything like the cost of restoring them. If they are relatively modern, there still may be many well looked after original cars to choose from. There is no reason to restore a Mercedes-Benz W126 S-Class for instance, as they made almost 900,000 of them and there are still many great low-mileage cars being pulled out of wealthy households. Same with Jaguar XJS, where they made over 100,000 in 21 years of production.

With 'modern classics' a modicum of caution is advised, especially on the more complicated cars. An XJS isn't the kind of thing you want to restore: If you pulled it apart you would probably never get it back together again! Even on a well-preserved original, maintenance is not for the faint of heart. There are 17 warning lights on an XJS and each one could represent a big bill. That said, if you do everything at once, and do it properly, they are not too bad once sorted.

It's not like air-cooled Porsche 911s are free to maintain either. Of the four air-cooled 911s I've owned, three of them have needed gearbox rebuilds. On one of the Ruf Porsches I bought (mercifully for Porsche Calgary) I had the Ruf-Getrag 5-speed rebuilt at an independent at a cost of $18,000 but the tech didn't put one of the bearings back correctly and the whole thing grenaded itself and needed another $20k rebuild. Sorry guys...

Also, never ever try to restore a Porsche 928. It is packaged so tightly any job takes forever, and the parts prices are eye-watering expensive. Some of them have this thing about the crankshaft machining its way through the crankcase. Don't ask me how I know...

If you see one of these, just keep driving...

Only the extremely brave and committed should look at things like Rolls Royce Silver Shadows, Aston Martin Lagondas and Citroen Maseratis. That said, there is the undeniable appeal about taking on a magnificent challenge...

As time goes on there will be fewer and fewer great examples of 'modern classics' left, and the good ones should increase nicely in value. A low mileage well preserved Mercedes-Benz 560SEC is now a $50,000+ car. Magnus Walker recently called the XJS 'The Next Big Thing'.

Engine bay is slightly intimidating, but at least you can see everything!

There is perhaps more upside finding a restored or well preserved original car that sells for substantially less than the cost of restoration. The trick is to try to identify a significant car that for whatever reason isn't getting the recognition it deserves. The Volvo 1800S that I have on Bring-A-Trailer right now is an example; duplicating the restoration would be more than $100k, and it may sell for half that amount. The California Special Mustang that I sold last month cost $150k to restore and sold for about 60% of that. Most of my restorations fall into that category too!

The Karmann Ghia (1955-1974) shares much of its DNA with a Porsche 356 at 1/3 the cost. Close to the same amount to restore though. The early cars (low light) are the prettiest but also the slowest. A Porsche 356 (or 912) engine and gearbox would transform the driving experience, and add value at the same time.

Other significant cars that can be bought for a fraction of their restoration cost include the Alfa GTV, Citroen DS, VW Karmann Ghia, 'big' Austin Healeys, Triumph TR250/TR6/TR8 and the Sunbeam Tiger.

With only 1,858 produced, there are not enough Mercedes-Benz 300SL Roadsters to go around - so the price keeps going up, far beyond the $500,000 cost of restoring one. The average price of a Roaster sold at auction in 2021 was $1,055M. This car, one of 218 late production examples with disc brakes and an alloy block, sold for $2.1M at the RM auction at Scottsdale last month. That is a big premium for 75lbs of weight saving! The best and the rarest are usually the best performers.

At the high end of the market there are those ultra-desirable classics where there aren't enough to go around. The sky is the limit with these cars. The one thing I've noticed at this end of the market is that the very best cars out perform average examples. Don't be afraid to pay top dollar for the best - you will rarely be wrong.

The last piece of advice I can give is that timing is almost impossible to predict. The most savvy collectors take a very long-term approach and only sell when the market is eager, but luck (good and bad) still has a sizeable influence.

I sold this 69 Alfa GTV as a well-loved but rusty project about 10 years ago. It was treated to a spectacular cost-no-object restoration from Coachwerks in Victoria with bills of over $CDN200k. It sold at the 2019 RM Auction in Monterey for $USD $117,600 including buyers fee, netting the owner about half of what he had into it. I think if the the car was auctioned today, he would have got his money back. Timing, as they say, is everything.