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.
Your Soooo Right– We make choices for all kinds of reasons–I’m pretty sure economics is the biggest factor why we choose less than our dream house/car or whatever– The wealthy(ER) folks will Scoff at your choice (these are people who “Almost Always” had inheritance & of course have a nicer /rarer or just more desirable car than you– or folks who will Never own a classic (Often not even a home)–but somehow they can look down their nose at what you own–The human animal is a Strange creature–
The Wealthy, so it has been said, are not like you or me. But why anyone would care at all about what someone else might think of my choice of cars escapes me entirely. I don’t envy what they own, and to be frank Nothing they or anyone else might own is something I want. I don’t care what their car might be worth. The more expensive it is, the less they tend to drive it, and a stationary show car is not a “car” as I understand the term. It’s a full-scale model.
Automobiles and collecting aside, the wealthy are simply in another world than you and I, and don’t care too much of it. I’ll leave that last point to you to process.
Not all the rich are the same! I have met many of the ultra rich that have calloused hands for the same
reasons we do and they love doing it. They only have themselves to impress. The effort/results they put into something is more rewarding than the dollars! It is a shame to buy something just to show it off because the only thing invested is their parents money.
After selling my 89 C4 convert when covid hit, I had thoughts of replacing it with something cheap to buy but still had some fun to drive character . I watched the ads for a few months and settled on a 70,000 mile 97 Thunderbird, never winter driven, and purchased from the 78 year old original owner. It only has the 3.8 V6, but with gas prices gone ballistic, I don’t mind so much. The ac blows cold, the stereo works fine, I have the only one in town so it works for me. At this point in my life, working ac is more important than horsepower. 🙂
I agree with your outlook about owning cars and the comments. I guess I’m in between. I own a Classic 280Z ’77 and ML 430 ’99, and I get a lot of remarks and oohs and awes. But the truth is they each have a story and I never went out looking for them; they were given to me, and they weren’t in great condition. I believe that when you are given something, you take care of them, but I never intended to own these cars for no other reason than out of respect of those who gave them to me. I don’t feel any upward status because I own them because I drive an everyday older car (Lexus) that I identify with, not the classics. Your cars should fit your lifestyle and not be a burden. They should also have a story behind them. That’s what makes them special, i.e. Classic.
I’ve been upgrading my car collection, as I believe there is a price correction coming in 60s cars. So, I am assuming the more rare and valuable cars will hold value over the “average” car. So, this could work both ways.
Who’s editing this? Egregious middle-school error in very first sentence !
Nonetheless I enjoyed the article!
Don’t agree. Be patient and buy what you want. This applies to everything in life. Regret comes from settling for second choice. As long as you don’t want a 64 Ferrari GTO and only have $25,000 to spend! Really understand what you want, look at the prices make a commitment to look and stick close to your budget, check the car though and through make the decision.
Very well said. Thank you.
I whole heartedly agree with the author. There are lots of choices when it comes to cars. And what’s affordable now may not be in the future. If you can’t afford a particular car think about why you want that car. Is it the marque, the track history, straight line performance, styling, etc? Each generation has cars that competed against each other in all of those categories, other than marque. But even when it comes to marque there are dramatic differences in price. I have owned a lot of cars from different manufacturers, mostly American with a few Mercedes a BMW and newer a Mini Cooper. I enjoyed them all for various reasons. I agree with one of the other commenters here. If you don’t drive it it’s a model. I drove the tires off my 69 Z28 and my 07 Shelby GT 500 convertible. The older I get the more experiences mean than things. You can’t take it with you. Enjoy it while you can.
My broken down project Series II E-type really relates to this article.
I have to say that I agree with CamaroJoe. Assuming you are not delusional and have tastes far beyond your means, substitutions can sometimes feel like giving up in the 4th quarter. I grew up poor but managed to stick with my dreams and have made a very good life for myself and my family. The only compromises I made was what luxury I would forego to work the extra hours to get what I really wanted. ( and by luxury I mean working extra hours rather than surf casting for stripers). Don’t settle, don’t quit and find a way to get what you really want. You will NEVER regret it.
Good good for thought Dave Kinney. Just buy what you can manage to afford and be happy.
I would do some substitutions for sure but in the end it would be something I like to drive. I have a huge list so if A isn’t open then I need to check if B is and so on.
I agree with the author. I was in a situation where “car X” was a little out of budget, so I went with “car Y” that offered 85% of the driving experience for a price I could manage. Are there any regrets? Of course! But I’ve had some form of regret with any purchase I’ve made-even when it was the ideal choice. Buy what you can afford and enjoy it.
I used to teach a class regarding good decision making. The process can apply to any decision you plan to make and surely that would apply to acquiring a classic car. Rather than letting emotions drive the process, one should generate a list of must criteria…must not cost more than this much, must have a stick, solid body, etc. Then, you make a list of wants (would like a particular year, a convertible, engine, color, etc.) which become differentiators once you come up with with a list of potential choices. Which car best satisfies the criteria?
This doesn’t mean you can’t change what your needs and wants are, but it provides a rational process for making a good decision. Some do this intuitively, but others are more emotional…sometimes it works out, sometimes not. Good luck to all and find your diamond in the rough. I’m always looking for mine.
Interesting comments – all bringing some perspective to the topic. I find myself falling in the middle of the range of replies. Nearly 20 years ago, I was looking for a fun convertible to drive and lusted after a Cobra. I couldn’t afford one, so I started looking at options I could afford. After some spreadsheets and soul searching, I ended up buying a BMW M-Roadster in Imola Red. I’ve had so much fun with the car, I still have it.
About 10 years ago, I was interested in adding an M3 to the garage. Again, a car optioned the way I wanted was out of reach. I happened to be at a Mecum Auction in Dallas and ran across an E60 M5 (with S85 V10). The price was right, and I grabbed it. It isn’t as nimble as an M3, but it is a 500 hp beast. I still have this one too!
I guess the moral of the story is – if you buy something that isn’t exactly what you are looking for, you can always trade up later … or you may find that what you bought is more fun than you thought!
In my case I wasn’t looking for a specific car, but a car found me. Listed in FB Marketplace was an overpriced 1992 Mazda MX-3 GS for $3500. It caught my eye and I had to do some research to refresh my memory about this car. Having had a few Mazda’s – I currently own, since new, a ’91 Miata – this car seemed like a sibling to the Miata. I kept seeing it posted whenever I was looking for other car items and as the price came down I finally paid it a visit. It turns out it was a one owner car that was donated by the family to a non-profit. It was parked 16 years ago and is not currently in running order, but it is virtually a complete car minus a few trunk tools and an ash tray with a solid body albeit faded and with a musty interior. So I worked up a spreadsheet of my estimate to get it running (some risk here) and cosmetically refreshed while trying not to spend any more than its market value (again risk). My wife supports me having a project, so we made a deal that helped me and gave them more value than a recycle facility. I’m enjoying the process starting with deep cleaning in the interior pulling out seats, console and most panels. I’ll wait until spring to dig into the aluminum 1.8 V-6 which will need the timing belt/water pump job done. Dreading the fuel tank cleaning, but this will be educational as well. Taking my time with no deadline to meet. And saving one unique automobile from the scrap yard I hope. Fate is sometimes a factor in these “finds”.