On my gone, but never forgotten, Pt. 2
The Bank of the Fixer-Upper
People buy old cars for a number of reasons. The ultra wealthy sometimes buy cars so desirable that purchasing them ends up being a profitable endeavor because they are investments asset that will appreciate more than the costs of garaging, insurance, maintenance, and repairs. For most people however, this couldn’t be further from the case.
I sold my old 535i for so little that I will never publicly publish the amount because it is too embarassing. I actually sold it for less than a junkyard was willing to pay for it, because my preference was that it go to an enthusiast with some chance of keeping it on the road versus straight to a yard to be immediately scrapped. And the honest truth is the different between what the yard would have paid and what I sold it for is no longer amount that is that significant to me. Suffice to say, I sold it for less than the $2900 I bought it for in 2006. Some of the conversations I had with prospective buyers reminded me of a darker side of the old car money cycle that I had nearly forgotten about because I have been out of it for so long.
Chances are, one doesn’t buy a car priced with junk cars if they can afford a car that’s quite a lot nicer. Even if one does genuinely love classic cars and old BMWs, there is a price one can pay for a car good in condition that works well, and today for an E34 that isn’t an M5 that price is around $10k. Back when I was shopping for my first 535i, I could’ve bought a pristine one for about $4500. I didn’t have $4500. I spent almost ever penny I had on my first car, creating the vacuum of brokeness that is part of why I started my first business that scaled shortly thereafter. I honestly would’ve bought one that wasn’t in need of repairs, but I simply couldn’t. I now realize that buying a broken old BMW is effectively a form of very expensive financing for people who don’t have access to financing.
In its final listing, I was very clearly that my car was in poor shape and likely best suited for parts. With some wrenching it was drivable for a bit longer, but its rust issues made it ill-suited for restoration. The only feasible way it could or should have been kept on the road was if someone who was mechanically knowledgeable and able to repair the car themselves was willing to spend a couple days wrenching on it to make it somewhat safe to drive. Still, despite my transparency, people called me with hopes of buying it now, and slowly fixing up at mechanic shops over time. They figured they couldn’t afford a nicer car, but they could slowly take it in for one fix or the other, and eventually own their dream car. This fantasy was a bridge too far for me, and I refused to indulge it.
I simply, but kindly, said I would not sell the car to anyone who was not mechanical enough to work on it themselves. Just like financing allows one to buy something they can’t currently afford by paying installments and interests, buying a cheap old car theoretically affords a similar outcome. One can buy the car now, and pay a type of “installment” in repairs over time, and have the car of their dreams. But there are a few problems with this.
Firstly, rather than buying a working car, as one does with a traditional loan, one is starting off with a car that doesn’t work. So one is paying interest, rather than earning interest on savings, on a car that can’t be used. Secondly, the effective “interest” one would have paid buying my particular car would have beens hundreds if not thousands of percent. I would guess one would have had to spend at least $20k at mechanic and body shops to make my old E34 simply pass a safety inspection. My own estimate for what it would cost to actually restore the car was about $100k. This is, again, for a car that if pristine, would possibly be worth $10k to someone. Yet, people fall into this trap all the time. Honestly, I did when I first bought this car.
I paid $2900 for a car with lots of small problems and some big ones. It had many more problems that I discovered after I bought than I knew it had when I bought it, and even simply summing the costs of the needed parts would have taken the bill to well above the $4500 I could have paid for a well sorted, maintained, and garaged example. Indeed, I hazard to guess what I spent on repairs and maintenance for my old E34, but I would guess that even doing the majority of the repairs myself and with the help of my friends, I spent at least $15k over the years fixing a car I eventually sold for less than scrap value. I wouldn’t be surprised if that number was actually over $20k, dare I even go through the receipts I have and try to add it all up. If I had instead bought the well sorted example of my car, I estimate I would have spent less than half of that, and the car today would be worth more than I had paid for it, instead of much less. My “installment plan” to save the $1600 I didn’t have as a 15 year old was very expensive, indeed.
Others who called me were more reasonable in their plans, and had the requisite knowledge to own my car. They reminded me of myself, when I had less money. Even to them, part of me wanted to just say, “look, why don’t you just save the $5–600/month that you will easily dump into this car for the next six months, and then buy a nicer one that you’ll only have to dump $1–200/month into, and will always be a much better car.” I almost felt a little guilty about potentially perpetuating this losing economic cycle.
When I think of how much money I spent as a teenager on my car, I could’ve literally made payments on a newer, reliable used car, though I don’t think teenagers qualify for credit. I had to constantly borrow and beg for money from my dad, before my business started to grow, just to keep my car running well enough to drive to school and avoid taking the nightmarishly slow public buses into DC. But all of this thinking is purely in hindsight.
Old, cheap classic cars are bought with heart, not mind. This is the basic concept of Hoovie’s garage, a wildly popular automotive YouTube channel that captures the spirit of the American car lover, though a bit more upscale, since he now has that YouTube money. As much as these cheap old cars are like a form of sneaky predatory lending, the purchaser is also making those payments to the heart and soul. Yes, I spent way too much fixing up a car that probably wasn’t worth fixing even when I bought it. But that was probably also the most rewarding money I have, and ever will have, spent. So maybe it wasn’t all that bad.