Jay Leno nearly didn't buy his McLaren F1, a 627-horsepower hypercar that held the title of world's fastest production car for more than a decade. It turned out to be a sterling investment. "I was the second owner. It was for sale at McLaren, and it was close to a million dollars new. They were asking $800,000, and I thought, 'Well, that's crazy. It should be worth a lot less than that.' But I came back two weeks later, and I bought it."
Twenty years later, his concerns about the price are a distant memory. The last offer Leno received for the car was $12 million. Of course, he's never selling.
Not all car buyers are going to realize such -returns. Most are lucky to sell a car for half of what they paid for it. But there's real money to be made in this most thrilling of asset classes.
To help you avoid some key mistakes, Fortune spoke with Leno, host of Jay Leno's Garage on CNBC; Barrett-Jackson Auction Co. CEO and chairman Craig Jackson; and Bradley Farrell, CEO of the Finest Automobile Auctions. Their advice:
Fall in Love
Farrell: I don't talk to my clients and say, "Oh, buy this car based on value," because nobody knows. There's no inside scoop on cars. So I always say find something you're inspired by. Research it, or find a friend who is knowledgeable enough to walk you through that process. Drive it--because it can't be enough that it looks good. And then if you fall in love with it, you buy it.
Leno: If you're buying cars just because you think they'll appreciate--and you couldn't care less about them--well, then you're never really going to be happy. Up until just recently, if you could sell a car for near what you paid for it, then, God, you were a genius, that was unbelievable.
Jackson: Buy the rarest, best car you can that you love. Over the long term, if you buy good cars they turn out to be very good investments.
Investing in a classic car doesn't always mean buying an older vehicle. It can sometimes mean buying a brand-new car.
Leno: The McLaren P1 was a little over a million dollars when it came out. They're calling it the first car that has never depreciated because they made only 375 of them. Once those were sold, the prices went up the next day. Now they're $2 million, even ones that are just 18 months old.
Jackson: When the new [Ford] Mustang GT350Rs came out, they were selling for double the original retail listing. If you want to buy one of these, go ahead of time, talk with the dealerships, and get your name on lists a year or so in advance and buy one at MSRP.
Stick With Stick
Jackson: I hate giving this tip because I'm actually trying to buy some of these for myself, but here you go: The last year of any car with a stick shift in it is going to be a future collectible. As Porsche and everybody else phase out the sticks and have gone to F1-style, double-clutch transmissions, which are a joy to drive, there's still a certain segment that misses the three pedals and running the Ferrari through the gates. Buy the last year of the cars with a stick.
Leno: The Porsche Carrera GT was the last truly analog Porsche. Those were about $450,000 when they came out in 2004. They dropped to about $275,000, and now they sell for close to a million dollars.
Vehicles that weren't so desirable to baby boomers when they were first released in the 1980s and 1990s are now finding an audience with Generation X and millennials.
The vehicles, especially odd, niche cars like the Smokey and the Bandit-era Trans Am and Ford's Fox body Mustang did particularly well at the Barrett-Jackson auction held this January in Scottsdale.
Leno: I think first-generation [Mazda] Miatas will become collectible because it was a huge hit when it came out [in 1989] and they made a huge impression on people. It was just a fun, light car to drive, in the classic British sports-car tradition. Guys who were maybe 12 or 13 years old when the Miata came out thought it was cool. In the next 15 or 20 years they might want to go back and buy one of those just for the fun of it.
Farrell: Cars should not really be looked at as alternative assets unless you're dealing with the top blue-chip cars that a collector will always want. In my opinion, [original] Bugattis, even at $3 million, are a steal due to the rarity of the cars. Very few survived in France after the war. There were 8,000 made, and there's only 800 of them left, so they're undervalued.
Hold Your Nerve
Farrell: [The classic car market] is no different than real estate with its fluctuations. For example, Porsche 993s, particularly the Turbos, are currently selling for around $175,000. I think when the tide comes in, things will start to balance out. Once that happens, I think you'll be able to buy 993s for $100,000 again. But you have to wait to ride that wave back out.
Additional reporting by Kirsten Korosec.
A version of this article appears in the March 15, 2017 issue of Fortune.
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