Earny Asks: Why Is an Old Porsche So Valuable?

If you are or know of someone who’s at least a little bit obsessed with cars, then this is a special week for you or your acquaintance.

It’s Monterey Car Week, one of the biggest celebrations of cars and car culture in the U.S., if not the entire world.

With that in mind, and the fact that Earny and I are more than a little obsessed with cars, I thought it would be instructive to talk about supply and demand from the point of view of car enthusiasts.

This one isn’t just for the car people, though. If you’re wondering about why some things are valued more highly than others — and that analysis includes stocks — read on.

Earny asks: Why is an old Porsche worth, well, anything?

Answer

Well, just look at it, Earny. It's gorgeous.

Seriously, though, the question makes sense. A car is technology and new cars should be technically better than old cars. I get a new iPhone every four years because the new one just works better. Even nontechnology items, like a chair or a bicycle, get tossed when they’re no longer good or the owner simply wants an upgrade.

Most cars, too, lose value every year until they’re eventually sent to the scrap heap.

Just not Porsches — or any collectible car, be it a Buick GNX or a Ferrari 250 SWB.

Why? What drives the demand for these old things when the new ones are so much better?

Let’s ignore nostalgia. That’s certainly one reason and maybe the most critical one. After all, collectors talk of the 30-year price bump, where people who hit middle age can afford and buy the poster cars of their younger years.

Here Are 3 Key Factors That Drive the Collector-Car Market

Events

The first one is events. To which events does a particular car give you access? My daily driver might not garner a single glance at the local cars-and-coffee event, but a less expensive 1980s VW might draw a crowd. Similarly, events like the Colorado Grand enable people to drive historic race cars for 1,000 miles on public roads, provided the car was built no later than 1959. Want to live out your dream of being Fangio — the legendary Formula One driver — in a 1950s Maserati? The Colorado Grand is the event for you. Provided you can afford a 1950s Maserati. If not, you can buy a cheaper, and slower, car and pretend to be one of Fangio’s competitors!

Community

Events like a local cars-and-coffee or the Colorado Grand rally lead us into the community aspect of collector-car ownership. You see, once you have that car, you’re part of a community that creates even greater bonds to that car and cars of a similar period. And it’s not just about the time period. Brands matter, too. Earny asked about Porsches, and there’s no greater group of enthusiasts than Porsche nuts. I should know!

What makes the Porsche community so tightly knit? I liken it to community creativity. Porsche cars, despite 75 years of looking relatively similar, are a blank canvas. The factory offers myriad options for customization, while owners take it upon themselves to modify their cars to suit their dreams. As I wrote in this article for Autoblog, “humans crave creative expression, and when we can find a community to share it with, everybody wins.”

The other thing about Porsches is that they’re reliable. I’ve driven my 35-year-old 911 from Colorado to California, up the coast to Canada, and then back: 4,500 miles and the car didn’t miss a beat.

Economy

Last is the economy. As wealth increases, people purchase more luxury goods, and most collector cars are luxury goods. There’s also a global aspect to this. Currency fluctuations and tariffs can affect the market, creating incentives for arbitrage: Buyers can purchase cars from abroad when they can get good deals or limit their searches to local markets when global markets become too expensive.

This wealth effect also entice entrepreneurs to create investment pools to buy cars. Collective investments reduce risk through diversification and also give investors access to the asset class without having to mop up oil spills in their garages.

How Does This Car Analysis Apply to stocks?

While my list above is hardly exhaustive, it explains a number of the key reasons that collector cars have value.

And the world of investing in stocks is really not much different!

Events and Community

Let’s combine these because I don’t think social events are really drivers of stock prices. But community is a big driver, like the rise of Reddit’s Wall Street Bets, which saw stock traders band together to take on hedge funds. In some cases, they won!

Or you can find communities of people who research stocks using technical analysis or fundamental analysis. Or you can join groups of crypto traders.

I could even expand community to include investor sentiment, like the kind that TheStreet Pro contributor Helene Meisler measures. She looks at whether investors collectively are bullish or bearish as an indication for what might happen next in the market.

Similarly, technical analysis, which I like to use, analyzes trends in stocks to see whether investors collectively are buying or selling.

Economy

Again, as wealth increases, people have more money to spend on investments. A 401(k) is a great example, even for people who don’t start out wealthy. That money will grow organically, as well as through dollar-cost averaging as money from each paycheck is invested. When the economy declines, people might stop investing in their 401(k)s or even pull money out of them to make payments on their homes. 

And what goes into your 401(k)? Mutual funds, pools of money aggregated from many different investors in order to build diversified portfolios. 

There’s obviously much more to it than this, but I hope I’ve made the point.

Summary

What drives collector prices isn’t really so different from what drives investing in stocks. It comes down to finding a community that you want to be part of, and if the economy goes your way, you will make money.