There are three basic ways to invest in an older Porsche, each with pluses and minuses (Part III: Defining the Collectible Porsche)

In the June issue, I examined some individual Porsche models and outlined what factors set them apart as either collectible or rather ordinary. Last month, I discussed those factors in-depth, with respect to rarity, firsts and lasts, and race history.

In this, the final installment of this series, we deal with three additional determinants of value that come into play if your car is collectible. They are the condition of the car, the general market trends, and how you plan to market the car.

Condition and history

We all know the difference a flawless paint job can make, or the value of a clean and tidy engine compartment. But the issues that matter vary between race and street cars. In general, race cars stand on their accomplishments. Physical condition, while not unimportant, is of less concern. Street cars are all about condition. History, while nice to have, is of less importance.

General market trends

Right now, we are in the middle of a giant upward movement in vintage car prices where everyone simply says there is no end, that these prices will never go down. Most failed predictions have one consistent underlying error: They assume things as they are today will never vary. We've had a long run-up in vintage car prices, and it is my guess that we will not continue this level of price increase until every Carrera RS Touring is worth a million dollars. Every 900-square-foot bungalow in Oakland, California, may be worth $1 million, but housing is subject to a far greater demand than classic cars. So when will the crash come?

I don't know. All booms are fueled in part by access to inexpensive capital. The great run-up and crash of the 1980s was driven by the Japanese and the spending power of a highly appreciated yen. The run-up today is fueled in part by the euro, also a temporarily strong currency. It is also fueled by exceptionally low borrowing costs in the U.S. and a strong U.S. economy. As these change, so will market pressure.

It is possible to predict what will happen when the market adjusts. First, those cars with the highest run-ups will see the fastest declines as the market "rethinks" values. Next, many cars will not sell, as sellers refuse to recognize the dramatic fall in prices. This can be noted at auctions as fewer cars get sold, or by watching classified ads and seeing the same cars for sale month after month. Finally, it will be speculators who get hurt the most, those with the idea of flipping cars at ever-greater prices. If you keep an eye on the inventory of exotic car dealers, you'll get a good sense of how the market is going, or not going.

How to buy or sell

The method you choose to reach the market will have an effect on how much you pay or receive. It's a simple idea: Generally, the more work you put in, the better deal you will find.

When selling, one exception to this rule is that a dealer or top line collector car auction can sometimes do better than a private party selling the car themselves. This is because these venues may have access to price-insensitive customers who often will not spend time slogging through private-party classifieds.

Internet auction sites like eBay are best seen as a communication tool for putting together dealers and/or private buyers. So eBay is not actually a different chain, but rather a way for buyers and sellers to communicate.

How to pick a winner?

Patterns of the past frame the future. There are three basic ways to invest in an older Porsche, each with pluses and minuses. Easiest is to buy a certified collectible, such as a 904, Carrera RS, or 356 Carrera Speedster. The downside is that it will require a large investment and there is no guarantee that the price will jump during your ownership. The upside is that you will own a car in high demand and there will always be buyers for it, even in a down market, though perhaps not at the price you might wish for.

The second basic pattern is to buy a car with strong values and not worry about having a true collectible, such as a 1970 911T coupe. The positives here are a modest investment and a wide selection of cars from which to choose. The downside is that the chance for big appreciation is limited. But you will have a car to drive and enjoy and won't have to mortgage the house to afford it. One secret in the Porsche world is that good 911s or 356s are fun cars to drive, and if this matters to you, you don't need to pay the price of a collectible to have fun.

The third pattern is to attempt to buy a car that is not collectible now but has the possibility of becoming collectible during your ownership. An example would be the 959, a car built in limited quantities with big performance and some race history. Compare prices today to a Carrera GT, and you can see the 959 looks cheap.

However, from personal experience, I can tell you that the vast majority of people I know with collectible Porsches didn't buy them with this reason in mind. They bought them simply because they liked the car. There is much evidence of this.

For example, how many people do you know who have a collectible Porsche or two, but have also sold cars that later became collectible? If they knew the patterns, they would have kept all the collectible cars, only to cash in after they became worth top dollar. Personally, I have owned and sold three 356 Speedsters over the last few decades and I wish I still had them all. So how do people end up with a Porsche that becomes elevated into collectible status?

When I ask people that question, they usually say they simply liked the car. When I bought our Carrera RS many years ago, for example, it wasn't collectible. I simply liked it and thought it would be fun to own. I probably paid more than it was worth at the time. I made no assumptions that the value would rise to collectible levels; it just wasn't a consideration.

So my advice is to buy something you like. If you select it carefully and it also happens to become collectible, so much the better. But in the meantime, you've owned a car you enjoyed and in many cases, that is its own reward.

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