Lessons from a poorly considered classic car purchase

This article is a humorous look at a my recent mis-guided purchase of a classic car, and bad trading habits. The parallels are pretty clear when one's head is over ruled by emotion.

I caught up with a long time subscriber to Traders Corner yesterday in London. One of his many constructive comments to me was how he loves the "Psychology Soapbox" articles I've written over the years. Those articles come when I have a wave of insipration that passes through my mind, and the words usually flow freely through my fingertips when that inspiration comes. As it so happens, I have been toying with writing today's article for some time, so yesterday's comments from our client was the nudge I needed to get down to writing it. Hopefully you'll find this humorous, interesting and full of lessons that can be applied to trading.

This story has roots in my youth back in the 1990's. I've always been a bit of a car nut and during my early teenage years in the 1990's the R129 generation of the Mercedes SL was launched. At the time, it was the most advanced car available, with power that rivaled the Ferraris of the time. And the show stopping feature was the electric folding soft top roof. I was in awe of these cars and always dreamed of one day owning one.

The desire to own one has never left me, notwithstanding the fact that these cars are now between 23-34 years old. I still think they are beautiful cars with sleek, timeless lines. I'd always vowed that I wanted to own a 500SL Mercedes Benz at some point before I died, much to the dismay and eye-rolling of my wife.

Since moving to the UK, I have gained an appreciation for the vast classic car community here. I've joined various classic car facebook groups and Mercedes SL groups. One of these is a classic car auction website called Cars and Classics. Their adverts flash up on my facebook constantly and I usually peruse the lots on offer longingly before closing my phone and resuming my mostly sensible life.

However, on one occasion in April 2022 a beautiful burgundy Mercedes 500SL came up on offer. My brother was visiting at the time and my wife was in bed with flu. We'd had a whisky or two, and my sensibility was overwhelmed by my youthful yearning to own one of these cars.

(Trading Lesson 1: Never trade when you are under the influence of alcohol)

The bidding was low for what seemed a low-mileage car and the auction had only three hours left until the hammer was due to fall. I thought "what the hell" and I decided to place a bid £100 above the best bid. I said to my brother that I was sure somebody would out bid me as the price was too low. I didn't expect my bid to be the last, winning bid. I was wrong. At 10pm on that fateful night, the hammer fell and I was suddenly the "winner" of the auction for a car I had not seen nor driven.

(Trading Lesson 2: If something is cheap, you should be sceptical)

I didn't sleep that night. I sheepishly told my wife what I'd done and she was unimpressed. But I opined that these cars are "modern classics" and they're starting to go up in value. My argument was flimsy at best.

(Trading Lesson 3: When you start to justify a purchase to yourself with bullsh*t reasoning, you're probably in trouble)

After stewing on it all night, I contacted the auction company the next day to plead my ignorance, that I had made a terrible mistake and suggested that they keep the deposit and put the car back on auction for somebody else to buy. To this I was told "No Sir, the terms are very clear and you accepted them. Pay up and come and collect the car or you will be dealing with our solicitors".

Now, I'm in the UK on a visa. I really don't need a legal judgement against me when it comes time for me to apply for UK citizenship next year. So I decided to own this problem, paid the money and made arrangements to go and collect the car.

(Trading Lesson 4: When you buy something in the market - mis-deal or not - there is no turning back. You own it whether you like it or not.)

After collecting it, I quickly discovered why the bidding on this car was low. The suspension was bouncy, the fuel gauge didn't work and the radiator burst on the journey home. These were the first of many other niggles which I would later discover. I had to get the radiator fixed before I could decide what to do with this car. So I took it to a local mechanic who deals in German cars and asked him to fix the radiator and give it a good look over and tell me what else needed to be addressed to make it reliable. At that stage I was thinking I'd put it back on auction as soon as I could get it back on the road. But it turned out the car needed a lot doing to get an MOT on it (road worthy certificate in the UK). I figured, well... in for a penny, in for a pound.

(Trading Lesson 5: Your first loss is your best loss. Don't hold onto a loser)

Once the mechanic had got the car into a roadworthy state and given it an MOT, (and presented me with an eye watering bill) I figured I may as well drive it for a bit and then get rid of it after few months. Summer was coming and perhaps I could enjoy a bit of open top driving in it. However there was still a lot of stuff that it needed to be addressed.

Much like a stray cat that arrives on your doorstep, and you decide to feed it for a bit, it eventually worms its way into your heart. This car did the same to me. I gradually started to fall in love with it and started throwing more money at it to address the various other niggles.

(Trading Lesson 6: Never fall in love with a stock. Especially one that is costing you money)

(Trading Lesson 7: Never average down on a loser)

Fast forward to today, I have now spent more on fixing this car than what it cost me to buy it in the first place. And I am not done yet. I have done the suspension, tyres, brake discs, brake pads, fuel gauge, restored the mags, replaced the soft top roof, fixed the soft top roof mechanics, replaced both distributor caps and rotor arms, replaced a number of the rubber hoses in the engine. And just this past weekend I have replaced all 8 fuel injectors.

All of my efforts have left me with a car that is now quite reliable, but still far from perfect. I enjoy driving it, and I love the sound of the 5.0 litre V8, but it consumes an enormous amount of fuel. Whenever I put my foot down, I imagine there's a petrol station owner smiling somewhere.

If I'm honest, I am close to the breaking point where I may throw in the towel and cut my losses on this car, because it just keeps consuming my time, money and focus. But I know that will be akin to selling out at the bottom, capitulating just as the worst is almost over. Or maybe not... I guess that is the thing about capitulating. You just don't know how much worse things will get but you reach a point where you just want the pain to stop.

I know that if I do capitulate now and sell this car, whoever buys it will be getting all the hard work, sweat and tears I have put into it. And I will be the one that looks silly for selling it.

(Trading Lesson 8: When you ride a loser, and add to a loser, your capacity to keep a cool head eventually goes out the window and you capitulate in a state of disgust. That's usually when the bottom forms)

In any case, I have a story to tell and I have scratched an itch that I have had my whole life. I should have gone about this in a more sensible way and should have done my homework properly beforehand. But if I had done that, my sensible side would have most likely kicked in and I would not have bought the car I'd always dreamed of owning. So I'm in it... very deep in it. But I always think that in life we generally only regret the things we didn't do. Mid-life crisis? Yes, probably.....

I recently was a guest on the Head Over Wheels Podcast, discussing the purchase of my Mercedes Benz and the history of the car. Listen to the Podcast here.