A Dave Ramsey Caller Asks: Can a Classic Muscle Car Outperform Buying a Home?
In a recent episode of “The Ramsey Show,” a caller named Joel from Fairfax, Virginia, presented a thought-provoking question: Is trading his paid-off 2023 Ford Bronco Sport for a classic muscle car a wise financial move? The answer, however, is more complicated than it seems.
Classic Car vs. Long-Term Stability
Joel, 56, earns $95,000 annually, is child-free, never married, and has just begun his investing journey. As part of Dave Ramsey’s “Baby Step” 4, he contributes 25% of his income toward retirement. With a net worth of $194,000, including his Bronco, $25,000 in savings, and over $143,000 in two 401(k) accounts, he currently rents and has no immediate plans for retirement.
Joel’s inquiry centered on whether a restored classic muscle car could positively affect his net worth, particularly since new cars depreciate rapidly. Co-host George Kamel answered decisively: “Should I invest in a classic muscle car? No, under no circumstances would we consider that an investment. It’s a liability disguised as a hobby.”
The Dream vs. Reality
While Joel dreamt of owning a 1971 or 1972 Buick GS convertible, Kamel and co-host Ken Coleman reminded him of the financial realities. The market often rewards only the rarest classic cars, which are usually tied to extraordinary stories. Coleman pointed out that a one-of-a-kind 1962 Shelby Cobra recently sold for a staggering $13.75 million, a far cry from the everyday options.
“The idea of a cool classic car is great,” Kamel acknowledged. “But merging that dream with retirement planning is a fool’s errand.”
Instead, both co-hosts encouraged Joel to divert some of his 25% retirement contributions towards a home. With rent prices climbing steadily, securing a property could be crucial, especially as home values in his area approach or exceed $500,000.
The Rare Exception
There is, however, one scenario where investing in classic cars could pay off: if you possess the tools, skills, and dedication to restore and sell them for profit—essentially flipping them like real estate. Coleman admitted, “Is it a great long-term investment? Not really. It’s only worthwhile if you’re actively flipping these cars.”
Even automotive restoration projects are more about passion than profit. Coleman is currently working on a 1972 Volkswagen Karmann Ghia convertible, emphasizing that the costs can add up fast and are often better suited as a hobby than a financial strategy.
Conclusion
In conclusion, while the allure of a classic muscle car might be tempting, it’s essential to prioritize long-term financial stability. Investing in a home should take precedence over discretionary spending on vehicles that offer little in the way of real investment returns. Ultimately, focusing on building equity through homeownership will better serve Joel’s financial future.