Depriciation?

[Jazzman]

Elsewhere on this forum there is a beautiful FFR Roadster for sale at a very tempting price. Before I ask my question, I want to make this very clear: Timothy, you have a beautiful Roadster, it is obvious that it was very well done with the best parts, and you should be extremely proud of it. With this in mind I posit the following for your discussion: Is the depreciation on kit cars in general, and the Roadster specifically, always this severe? It appears that building a Roadster is a $55-$65,000 endeavor with all new parts. However, this particular 12 year old car is being sold for half this amount. I understand that cars are rarely if ever an investment that gains value, but this seems like a pretty severe hit for a very nice and still rare and desirable car. If I didn't want to enjoy the process of building my own, I would seriously consider this one. I have no plans to build a Roadster and flip it, but I also don't want to spend $60k and end up with a car which I could sell for $30k. I at least want to know if I am buying a money pit. I expected that there would be some depreciation, but I expected that due to the obvious quality of the car the price would not fall as much as it apparently has. What's the story on value of completed cars?

[edwardb]

Kind of a mixed situation, in my opinion. First, do these cars appreciate or depreciate? Unless you were able to source parts at huge bargains, did a lot of the work yourself (paint, for example), and really kept a tight budget, it's unlikely you would be able to retrieve your initial build cost. So they clearly depreciate. How much? Depends on the quality of the build and also obviously what the market will bear. I would not categorize these cars as "rare." There are actually 8000+ out there and quite a number for sale at any point in time. That is the reason a lot of guys choose to buy vs. build, especially if the build process isn't something they want to do or enjoy. It is a way to save some money if you just want to drive and are willing to accept what's on the market as your own. But I don't think it's fair to compare your build to this one. 12 years old is not a short time for a car. You won't find many 12 year old cars that are still worth half their original cost. So I would not project this 50% "loss" (assuming it sells for the current asking price) to a newer car and a newer version (e.g. Mk4 vs. previous Mk's). Actually I think if it sells for the current asking price, probably that's not bad given the age.

And BTW I don't think this is unique to our cars. I've been kicking around this enthusiast's car hobby for some years now. It's pretty typical guys don't get out of cars what they put into them. Only in pretty rare cases can you flip cars and make money. You have to really buy them low in the first place to do it. Somebody is taking a big loss somewhere.

[ClemsonS197]

Values are all over the map depending on donor vs. new parts, quality of build, type of build, motor, etc.

I bought an unstarted kit for basically $10k less than the original owner purchased it from FFR. I'd say most are upside down compared to what they put in to it. And this completely leaves out labor costs. I would not recommend buying these as an investment. Go find a 993 Porsche 911 if you're looking for that.

I'm building mine to keep for a long, long time. Selling value was not even a consideration to how I'm building my car.

[Mike N]

Each FFR is unique to its builder / owner. If you are selling one that happens to be exactly what the buyer is looking for, color, engine, wheels etc, you will get top dollar. If your car is shall we say 'unique' with a paint job that not everyone might like, or a custom interior that again may not fit everyone's taste then expect to either have to sell at a lower price or wait for just the right person to come along to buy it. From what I have seen if you build an FFR to a period look, engine, wheels, interior etc, and paint it Guardsman blue with Wimbledon white stripes you should find a much larger group of potential buyers and hopefully get a better price.

Should you expect to get all your investment back or even make money? As you note, that is not a reasonable expectation but I don't see why you can't own one, get enjoyment out of it for many years and still sell it for a minimal hit on your investment. You need to be very smart about how much you spend and make sure that you create a car that has a very good potential market. If your dream car is going to cost you $50,000 to build it is unlikely that you will recoup that when you sell, however if you can do it for $35,000 then there is a very good chance you will get most or all your money back. But look at it another way. You spend $50,000, drive the car for 10 years and thoroughly enjoy the car then you sell it for $30,000. Was it worth $2,000 a year to own and enjoy the car for those 10 years? For most or at least a lot of people here the answer to that question is almost certainly yes.

[tirod]

It's about provenance. We don't buy the car, we are buying the seller.

Two identical cars on the net, one has Name Brand sources for the parts, with a flawless finish. The other is garage built. Same parts, same flawless finish. The first gets a much higher price than the second.

Put both on the dyno, they make the same horsepower. Show them, they earn the same points. Race them, they make the same times. And yet the one with documentation, Big Name assemblers, and hitting on all the leading edge issues is highly desireable and nets more money. The other car is basically an unknown, built by unknowns, with a unknown motor screwed together by a nobody. It's a collection of risk - will the motor explode? How long before the clear coat fails. Naah, the first car was sprayed by Big Name, his reputation is good. That crate motor from Big Name Racing isn't going to blow up, and they have a warranty on it, too, right?

Even if you can see competent assembly and finish, if you don't know how it was arrived at, or who did the work, you assume the worst case, and offer money accordingly. The car sells for what it's worth as a functioning collection of parts, not a reputably assembled dynamic machine. We can't trust the other guy, we sure aren't giving him our hard earned money. Now, if Big Name personally supervised the construction, then, maybe we pony up. We have confidence corners weren't cut, that somebody knew the difference a ten thousandth of an inch bearing clearance can make. Even if that other car's assembler was the actual guy who did the work on both, we devalue the unknown, and pay for the lack of risk in the "better" car.

Considering the huge amount of unknowledgeable, even incompetent work being offered in the market, it's the way it is. We buy the seller - not the car.

[Kalstar]

I would say if you paid $30K for any Factory Five that is on the road, plan on very little to no depreciation. There is a bottom $$ that these cars fall to. If you spend 50K building it and it drops...worst case is 30K (like the poster said above, 2K per year = very cheap fun) if you spend 30K then it is worth 30K in 1 month or 1 decade. Classic muscle and Factory Five are a great way to have a fun toy with very little expense. It's like driving around your bank account "the money is still there when you want to cash out".

[Jeff Kleiner]

...It appears that building a Roadster is a $55-$65,000 endeavor with all new parts...

Not unless you go over the top on those all new parts. A complete kit with 3 link, a moderate crate Windsor, T5, nice wheels and tires with good paint can be done for <$40K. You'll have a hard time getting a return on investment if you go over that point, and the more you go over the lower the percentage of it you'll recoup. There are some builders out there who have spent $60-70,000 or more to wind up with a $40,000 car. There are plenty of others who have spent $30,000 or less to end up with $30,000 cars that are still worth that 10 years later. I'm in total agreement with Mike; you've got to spend wisely or be prepared to take a hit if/when you sell (and FWIW both of us have been involved with these cars for a decade+ so I think we have a pretty good handle on what history has shown).

Cheers,
Jeff