THE ECONOMICS OF RESTORATION
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At 09:06 AM 5/19/04 -0500, J. William Robinson wrote:
>”Pictures are [were] available on web site. Motor is complete but out of the car. Car is missing glass, hood, seats and radiator. Small parts are in boxes. Some body work has been done and
there is little if any rust deterioration. ....”
This can be the lead in to either wanting to sell a car, or thinking about buying one for restoration. Before you jump blindly into this with both feet, expecting to put the car back on the road for the cost of a little wrenching and a paint job, you should have an encounter session for a reality check.
First you should read How Much is a Project Car Worth? Also review Opening Your First Rust Bucket. These articles give you an idea of what you might be getting into for cost and labor. A running car could be in exceedingly bad condition from rust, and may even look bad, but it can still hold a certain value simply because it is dirveable and makes a nice toy, as long it can be kept on the road without any immediate major expenditures. So a moderately ugly rust bucket daily driver can be worth a few thousand dollars if it is just in good running condition.
Being disassembled is a severe bite on the value of any MGA. Once a car is disassembled it is pretty much committed to be a full restoration case. Instead of having physically functional bumpers which require no immediate investment, it may have decent restoreable bumpers which need minor straightening and (expensive) replating. Or new replacement parts may be cheaper than replating. The same logic holds for all of the visible trim on the car, including all chrome parts, all fabric parts, dash knobs, steering wheel, etc. As such, these used parts may have very little value after disassembly, and may be quite expensive to repair or replace. So when you first disassemble the car it will lose a considerable amount of value, and it may be quite late in the project before that lost value comes back.
There are a number of people who will restore a car for the love of the project as a hobby, and there is no accounting for the cost or value of labor. These people consider it a good deal, because it’s fun and in the end the total out of pocket expense may be less than buying a new car (and it may not suffer as much depreciation as a new car). In the case that someone feels rich (and lazy or not having time) and is willing to pay a pro shop a reasonable hourly wage to restore the car, the final cost will always be more than the finished market value of the car. The only possible exceptions to this may be some rare cars with finished market value in excess of $100,000, and the MGA is certainly not in that category.
Botched body work, or finished body work of less than show quality may have little or no added value if the buyer ultimately decides it has to be torn out and redone in a “more proper” manner. That may be purely subjective on the whim of the buyer, more of a difference of opinion from you, but it can substantially diminish the field of prospective buyers (narrower market and harder to find the right buyer). This is a very definite problem when the seller thinks he can bondo over some rust and repaint the car, expecting to sell it for more money. Then the buyer untimately sets the story right by telling him it was a total waste as it has to be redone to take care of the original problem which was never fixed.
The end result is that the car looses some value in the process of disassembly. Any subsequent labor time put into the project may induce only a very small added value, certainly not approaching the cost of paid professional labor. As such, much (but not all) of any cash investment toward labor is an additional loss. Any botched or substandard work may be a total out of pocket expense never to be recovered. From the day the disassembly starts until the car is back on the road again, virtually everything you pay for will add value to the car somewhat less than the cost. So naturally you will generally not be able to sell the project car for high enough price to recover what you put into the project. If you didn’t spend much on new parts or professional labor, then some of your (free) personal labor input may add enough value to offset some of these losses, and you might just about break even on cash return.
There is an exception to this “lose as you go” routine, but it comes only very late in the project, about the time the chassis work is finished and the body has been painted and is ready for reassembly. This is when the end may suddelnly be in site, and it may not take too long to put it back together. The process of reassembly has the opposite economic effect of the initial disassembly, and the car as a whole almost magically assumes a higher market value than the loose parts, possibly more of an increase in value than the cost or reassembling it. A pro shop may be interrested in buying a car at that stage to finish the restoration for a profit, or to buy it for a customer who might pay them handsomely to finish it. At this point in the project you might be economically better off finishing it yourself or maybe even paying someone else to finish it if necessary. But this is only if it is very near completion and will not require much more labor to finish.
So there’s the explanation why the car will (usually) not be worth as much money as you have tied up in the project, at any point in the project, and the difference could be substantial. Assuming you didn’t pay too much for the car in the first place, you should be able to sell it for more than you paid for it. You might be able to recover a large portion of the cost of materials that went into the restoration, such as body repair metal parts and paint, and new mechanical parts). You might recover a dollar or two per hour for invested labor time, whether it was your time of someone else’s time that you paid for. That can be a big negative hit if you paid going rates for a lot of labor time. When you add this all up, you stilll lose.
In the end there is always an economic penalty for abandoning a restoration project before completion. The only possible economic justification may be by way of the “sunken funds” analysis, where you write off and forget everything about what happened before today, and only consider the difference between cost to finish and the final market value. If it may still cost more to finish from this day forth than the finished market value, then it can make good sense to dump it. Unfortunately this applies throughout about 90% of the course of the project, which is why there are a lot of abandoned projects, and a fair supply of project cars on the market helping to surpress the market value.
The flip side of this senario is that the seller’s loss may be the buyers gain. At almost any point in the project the buyer may be able to buy a car for less than the cost of restoration up to that point in the project, often even counting nothing for labor time. This is exactly why the project car still has any market value at all, because if it was cheaper to start from scratch no one would ever buy a partially finished project car. This in fact follows virtually all the way through to the end of the project, so you may also buy a fully finished restored car for less than the cost of restoring one yourself. That end of the market is quite small however, with not many people wanting to spend full value for an MGA, and not many people wanting to sell their labor of love just after finishing it. But it does happen occasionally (often enough).
The value of a MGA in process of restoration will almost always be less than the money you have tied up in the project, with a significant discount against paid labor and new loose parts. A reasonable center of the ballpark might involve about $2/hr for personal labor (maybe a tad more for pro labor), $.40/$1 for new loose parts, and maybe $.80/$1 for installed parts and materials. There you can get out your receipts and a calculator, and you may be able to come up with a reasonable estimate.
You may have noticed throughout all of this that I make very little mention of mechaincal condition of the drivetrain or chassis parts. This is because a moderatey handy do-it-yourself type can restore an engine like new for under $1500, a gearbox for a few hundred dollars, and the entire chassis mechanical works for maybe under $500 including paint (but not including welding work on the frame). In other words, the body restoration is the overbearing expense factor, and the mechanical work is so easy and cheap as to nearly be ignored by comparison.
If you do most of the restoration work yourself, including body work and finishing up to primer paint ready for final coat, and only farm out machine work, then total cash invested to that point may be no more than 40% of the total final restoration cost, including most of the mechanical work. Another 10% may allow for a professional paint job (if not too exotic), and the final 50% may be needed to finance the trim parts. No kidding. There may be a huge unexpected bite in the end (pun intended) to pay for body packing and grommet kits, all new chrome, leather seat kits, door pocket and panel and kick panel and cockpit trim rails, carpeting, rag top and tonneau cover and side curtains and stowage bag (or windows and trim and headlinings and roof trim for the Coupe), wiring harness, lighting fixtures, dash knobs, some new switches and heater control valve, control cables, maybe refurbishing of the dash instruments, and new tires and exhaust system.
So when the sale ad says “90% complete”, but the picture shows a body in primer paint with no trim or soft goods, it’s a lie. The sad part is that the seller may actually believe it’s 90% complete, in which case there may be no reasonable meeting of the minds. In that case the car may remain stagnant in that state for many years before something intervenes to force a sale at a reasonable price. Here’s hoping that you are not the seller at a time like that. Either keep the faith and finish your reatoration, or try to have enough foresight not to start on one in the first place. For the financially prudent, consider buying one already finished.
It’s your money, and it’s your time. But in the end, it’s also your car and your pride.
Barney Gaylord - 1958 MGA with an attitude