The Muscle Car Profit Project — Part 2
Our analysis begins…
As described in our first blog, we are setting out to prove that it is possible to purchase modern day American muscle car, drive and enjoy it for a year, then sell it for at least $1 more than the purchase price plus the total cost of ownership (minus insurance costs).
This week we break down our initial approach to analysis.
We have established a set of core assumptions and criteria to guide our selection process:
- Models — Each of the 4 primary models are in scope: Camaro, Corvette, Mustang and Challenger. In the true muscle car spirit, we will only consider the 8 cylinder versions of each. Beyond that, though, we will not limit our analysis to specific option packages.
- Model Years — We will target vehicles that are anywhere between 1 and 4 years old (probably 2–3), as they have already absorbed the major depreciation hit and are unlikely to face any sizable maintenance or repair costs. We will assume that, in this narrow range of model years, all the vehicles are roughly similar in terms of reliability and maintenance needs.
- Mileage — We will only consider cars that have clocked less than 10,000 miles per year, preferably closer to 5,000.
- Budget — As our goal is to ensure the highest possible return on investment after the 1 year mark, we have decided that we will not limit our budget out of the gate. The analysis may reveal that our potential will be maximized by investing in the higher end option packages — the ZL1’s, the Hellcats, the Z06’s, etc. We will continue to re-evaluate this decision as the research progresses.
- Deal Type — We will target private sellers for our purchase and then, of course, sell privately when the time comes.
- Quantitative vs Qualitative — We will weigh quantitative measures far more heavily than qualitative measures. This is a one year stand, not a marriage. If an option doesn’t increase the resale value and it cannot clearly be shown to dramatically improve the overall performance, it will be removed from the equation. Prime examples here would be color, audio and wheel options.
- Originality — While modifications can certainly go a long way to increase performance on a pure bang-for-the-buck basis, they generally accelerate the rate of depreciation. For purposes of simplicity, we will target only original, un-modified vehicles.
- Transmission — This one is certain to spark debate. Philosophically, we feel that a performance car can only be enjoyed to its fullest with a manual transmission. But, for the purposes of our experiment, we cannot discount the fact that today’s automatic gearboxes may stand to improve both performance and resale value. We’ll leave both options on the table and hold out a little bit of hope that the combination of other factors will tip the scales in favor of three pedals.
To avoid the classic paralysis-by-analysis scenario, we will look to strike the optimal balance across just three data points:
- Depreciation Rate — We will examine rates of depreciation and price trends for each of the models that are in scope.
- Horsepower to Dollar Ratio — The higher the ratio, the more heavily they will weigh into our decision process.
- 0–60 Time to Dollar Ratio — The lower the ratio, the more heavily they will weigh.
Nice and simple.
We know that our mission will only succeed if we approach our analysis objectively, without emotion, and we are guided by what the data points suggest.
Rather than succumbing to the temptation to dive right into local listings, we’re first going to tackle all of the number crunching groundwork. We’ll begin to drill down on price trending before then moving onto the performance metrics. As our spreadsheets are humming, we’ll share any interesting insights that are revealed and provide updates on how the field is narrowing.
Thank you to all those that have already reached out with valuable observations and experiences. Please continue doing so to help us course correct down this zig-zagging road!
Until next time…drive well, with passion.
In our next update, we will drill down into a depreciation analysis on base model muscle cars.