As an investment vehicle, classic cars have been hot property in recent years (pun most definitely, unequivocally, assuredly intended).
If it has four wheels and has a bit of rarity or collectability, then chances are the price has gone through the roof.
But what about JDM cars?
Should you invest in JDM cars if you missed the boat with Tesla stock, Bitcoin, or shorting Silicon Valley Bank and Credit Suisse shares?
In this article I talk through the pros and cons of JDM cars as a potential investment class.
I was spurred on to write this article when I saw a Google snippet the other day from a site (which I will not name lest I fall victim to some kind of vexatious legal activity) which claimed in no uncertain terms that you should buy a JDM car as an investment because you’re guaranteed to make a profit.
Now, I don’t know about you, but I’ve always been told that outside of interest in the bank and government bonds, there is just about no other form of guaranteed investment. Anybody promising a guaranteed return is not to be trusted, or else a fool and his (or her) money is soon parted.
The ethics of Google recommending financial clickbait aside, this question got me thinking more intently about whether or not JDM cars are a good investment.
I want to share my thoughts and position, but ensure that you read the following disclaimer first.
This article is not financial advice, nor should it be construed as such, and is written solely for the purpose of entertainment.
The authors and publisher of this site accept no responsibility for any potential losses incurred by purchasing a JDM vehicle – or any other vehicle – as an investment.
Do your own research before making any potential purchase, and consider consulting a registered financial advisor or other professional.
What Is A JDM Car?
Just so we’re on the same page, a ‘true’ JDM car is one that was sold new in the Japanese domestic market.
For example, a Toyota Supra Mk4 that was originally sold to a buyer in Los Angeles and drove out of the showroom onto Sunset Boulevard in the mid 1990s is NOT a JDM car in the truest sense of the word.
However, a Toyota Supra MK4 that was sold to a Japanese buyer when new and then exported overseas to a market like the United Kingdom, Australia or New Zealand IS a true JDM car.
That being said, when it comes to ‘JDM car culture’ and JDM cars as a potential investment, the truth is that the term is used fairly generically to apply to any Japanese car with a certain level of desirability, rarity or other collectible value.
Although I am normally a stickler for using the term JDM in its correct context, in today’s article I’ll let that slide and use the more generic/mainstream meaning as the truth is that all of these desirable performance Japanese cars have gone up in price in recent years, regardless of their exact origin. Whether it’s an Acura NSX or a Honda NSX, you’ll be paying more today than you would have done five years ago, for example.
You might like to read more in my JDM meaning guide, however.
Why Are People Shilling JDM Cars As A Great Investment?
With that definition, and the disclaimer out of the way, why is it that JDM cars have gained attention and desire as a form of investment?
Long story short, the JDM car market has been going gangbusters in recent years.
Cars that were once relatively affordable – even the likes of the ‘hero’ JDM cars such as the MK4 Supra, Mazda RX-7 and Nissan Skyline GT-R – have skyrocketed in price of late. It seems like every week some JDM hero car or another is setting a new price record.
Even “second tier” JDM classics (think something like the Honda CRX Del-Sol – a superb car in its own right but more modest when new and never with such cachet as one of its bigger siblings like the Honda NSX) have climbed substantially price-wise.
I recently wrote an article about the Mitsubishi Galant VR-4 and opined that when I was back in high school around 2008/9 I was offered a mint condition, top spec VR-4 for around $6000 NZD. That same car would easily be over $20,000 today.
As with any investment – shares, property, cryptocurrency, tulip bulbs – there can be a strong component of “Fear Of Missing Out” (FOMO).
Once prices started to climb on JDM modern classic cars and the rising tide lifted all boats, this started an element of mania as people developed FOMO.
My view – from spending countless hours researching and writing for this site, as well as just generally keeping an ear to the ground – is that in recent years (particularly post-Covid) many buyers have been at least as much motivated by potential financial return as they have by the desire to actually own and enjoy the car in question, sometimes totally driven by potential investment return.
When I was first getting into JDM cars back in the mid 2000s, I looked at all manner of cars that are now worth some serious money but not once do I recall giving more than a moment’s consideration to what the future value of the car might be (in hindsight, that makes me an idiot – the extra running, maintenance and insurance costs of some of my potential purchases would have been more than offset by the capital gains).
Buyers now, especially since prices really started going wild, want to know that not only are they getting a good car but also that they can pay over the odds safe in the knowledge that someone else will simply buy it for more down the track (just like what happens with stock market bubbles, property bubbles etc)
With this in mind, I come with words of warning.
There is an old adage in investing that past performance is no predictor of future results.
Just because JDM cars have risen spectacularly in price in recent years doesn’t mean they will keep rising.
Prices might continue to rise (and on a long enough timeline I suspect they will – much like the share market tends to go up if given enough time to work through peaks and troughs … the long term trend is your friend) BUT there is every risk especially in the short-to-medium term that you might buy a JDM ‘investment grade’ car today and then lose money on it.
If I look at the market I would be buying in, since interest rates in New Zealand started climbing about six months ago and the economy has contracted somewhat, I can find examples of JDM investment cars that have sat unsold and are starting to attract some significant price cuts (whereas go back just one year and the same car would have flown out the door at the asking price)
Therefore, if you are looking to purchase now – when we are possibly still near the top of the market as per the classic chart below – you need to prepare yourself that you might wind up seeing the paper value of your car purchase evaporate.
If you are purchasing a good car (consult our buyer’s guides) for a price that is within your budget and which you ultimately really want, you need to ask yourself whether the investment return in an immediate timeframe matters anyway.
If you are buying a JDM car to enjoy and you can afford to do so without being dependent on its price going up after purchase, does it matter all that much if the price goes down in the next year or so?
On the other hand, those who are buying solely as an investment vehicle (once again, pun intended) may find themselves feeling a little worse for wear if the market starts to drop substantially.
Conclusion – Should You Invest In JDM Cars?
As with just about everything in life (apart from the age-old question of eating yellow snow, which you most definitely should not do) knowing whether or not to invest in JDM cars is a bit of a ‘how long is a piece of string’ question.
While there is every chance that prices might skyrocket even further, there is also potential to lose money and every risk that you would be buying in at the top – or very near it – at the moment.
I suspect that the absolute ‘cream of the crop’ cars, e.g. the likes of the R34 GT-R and Supra RZ will continue to make gains over time, particularly top condition and unmodified examples.
However, it is also clear that buyers have been paying over the odds for cars in recent years (particularly in the post-Covid, easy-money era that rapidly appears to be unwinding) not because a high mileage GC8 WRX is really worth as much as a new WRX when you look at it objectively, but because a combination of rose-tinted nostalgic lenses and a desire for money to find a return has meant that people are buying these JDM cars often in the hope and belief that the next person will simply come along and pay more.
Simply put, my view is that unless you are a bona fide investor (and you have the bank balance to go with it) then when it comes to buying a classic/modern classic JDM car you are better off purchasing something you want that is within your budget, and which you will enjoy owning and driving.
If it happens to make you money over time as an investment, then that’s great.
If it doesn’t and you either ‘break even’ or even lose money, then at least you’ve got a car you’ve longed after and enjoy.
For example, I’ve always wanted a facelifted twin turbo Mitsubishi GTO (3000GT for our American readers). They are too expensive for my budget at the moment, as buyers have been scooping them up to garage and treat only as an investment.
If I could buy one in my budget and enjoy it, I honestly wouldn’t care too much whether it goes up or down in value as I’d want to be using the car as the maker intended! Any potential capital gain would just be an added bonus. Cars are meant to lose you money in exchange for gaining enjoyment, aren’t they?
What are your thoughts on investing in JDM cars? I’d love to hear from you – just leave a comment below. Remember that this article isn’t investment advice either.