The Principle of Substitution effects us all, and it happens almost every day. It is most certainly impacting all levels of the collector car market at present.
So, what is it?
According to Valupaedia.com (yeah, that really is a thing), “the Principle of Substitution is the situation where the value of an asset is determined by the cost of acquiring an equally desirable substitute”.
Expanding on that, I’ll say that almost equally desirable works as well. We all know that, for various reasons, sometimes we settle on an “almost” choice. And there is nothing wrong with that.
In the real world—especially one with high inflation—you substitute all the time. That might be as simple as those name-brand expensive dinner rolls versus store brand (hey, the dinner is for your loudmouth brother-in-law, do you really think he knows, or cares about the difference?). Or maybe it’s something as simple as the lost remote for your old TV. Are you okay with a generic that works almost as good as the model specific one? If you are just waiting for the old set to die, maybe the dollar-store alternative is good enough.
I’m an automobile appraiser, and we deal with this all the time. And, since you’re a car person, so do you.
In the car world, the principle of substitution says if we are priced out of thing one, we start looking at a similar thing to buy. No manual transmission available on the Corvette in your price range? How about the same year, milage and bodystyle with an automatic for thousands less?
That Mercedes SL that you wanted in Silver is out of your financial reach, so how about the one in refrigerator white for 10 percent less? Is the Nissan Skyline of your dreams getting too expensive for your current budget? We know that a Nissan Altima wont scratch that itch, but maybe a Datsun 240Z will.
The corollary here is that if enough people make similar substitutions, the “second choice” will also rise in value. Brooklyn was once an affordable substitution for young professionals who couldn’t afford Manhattan…until so many young professionals moved to Brooklyn that it became unbelievably expensive. The silver lining is that there are almost always more substitutions. Today’s young professionals, priced out of the boroughs, might consider Jersey City, or Newark, or Zooming from Cleveland.
That is certainly true in the car world. There are something like 1.4 billion cars on the road, worldwide. Surely, enough of them can be construed to be cool and interesting to feed the next generation of cash-strapped young enthusiasts.
Price isn’t always the key factor in substitution. I’m a big guy, with big shoulders. I don’t exactly fit into a car that might have been a good choice for me, a Mazda Miata. So with a Miata-sized car out, what other fun, convertible opportunities await? Well, there are dozens of choices. I know I need something with more cabin space. Do I want something vintage? Something more luxurious? Faster? More prestigious? Do I spend more than the cost of a Miata? Wait—did I just talk myself into a 911 Cabriolet? Is that wrong?
The point is that there is no “wrong,” only what works for you and your situation. When applying substitution, you are actually building a decision tree in your head. The more you become aware of it, the better it is for all involved. Few folks would want to buy a collector car that doesn’t fit, won’t make you smile, breaks down too often or costs too much to maintain. But, if you like to wrench on your car, maybe a project is exactly what you are looking for as well as what you can afford. So don’t just defend your choice, celebrate it. What works for me might be entirely wrong for you.
Every day, a bunch of cars enter the collectible market, and that means more choices are yours to make. What works for you might not be the same as your friends, your car club members or the gang at Cars and Coffee in your town. It’s an embarrassment of riches in some ways, and that’s a good thing. When it comes to substitution in the collector car world, there is no right or wrong, only what’s right for you.