I like inexpensive guitars (ok, cheap guitars). I bought a guitar at a local show for $55. After spending about $100 to get it into playable condition and look nice, its now probably worth $65.

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Bill

I think that there are lots of people who collect guitars for the enjoyment of fixing them up and playing them. I recently bought a MIM Standard Strat that played like crap in the store but I thought had potential. I wound up putting a nut on it and going through the setup and now it plays great. But Now I am going to put a different tremolo on it, maybe some hopped up pickups and who knows. I just like playing it and it is another guitar on the wall for me to choose from when I want to make some noise. There was never an intent to make money, just to get another guitar.

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Tom Hintz, owner
Geezerguitar.com
NewWoodworker.com
NewMetalworker.com

As mentioned, the single greatest investment since WWII has been Classic Cars - outperforming the Market, Precious Metals, Art, but there's a catch...

You have to know which cars to collect and maintain.

Collectibles are driven mainly by three things:

Rarity - in the case of guitars, figure less than 100 produced (maybe even <50)

Condition - It MUST be playable. The 'Relic' is currently the rage, but I suspect a more pristine example will outperform it in the marketplace.

Provenance - It better be traceable to a particular Artist, or performance to get Top Dollar.

As mentioned, you need to factor-in Lost Opportunity Cost whenever determining Gain.

And, to do it properly, there is the Captial Gains Tax which must be reported and paid. The IRS is starting to come down much more intensely than ever on this (transactions today are simply extremely traceable) and this has already sent ripples through the Collector Car community. This will very quickly diminish your 'Gain'.

Finally, there's the issue of Liquidity - If you have $X00,000 invested in Guitars which have 'appreciated' to $X,000,000 and you need to get out from under due to a crisis or such, you may find that very difficult. Simply 'flooding' the Market at one time with your stash will have an adverse effect on the value of each of your instruments.

I'm not saying it's a Good or Bad investment... Only You can determine this.

But personally, sinking significant money into a Guitar Collection scares the beejesus out of me !

Good Luck with what you decide !

cheers!

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'11 FSR Am. Vtg. Ltd. Ed. CAR '57 Stratocaster (SN# LE02639)
'14 American Deluxe Ash Stratocaster
'12 Telebration Empress Telecaster
'99 Deluxe Nashville Telecaster
'12 FSR Telecaster HH
'10 Heritage H-535
'99 Martin DC-1E
'13 Lanikai Tenor Ukulele

As mentioned a few times already, collecting guitars as investments is typically not a profitable venture unless you have a lot of money and time. However, collecting different kinds of guitars for their intrinsic value is much more satisfying. I've been "collecting" for thirty years and what works for me is having a variety of guitars around for their unique feel, sound, etc. Get solid body guitars with single coils and/or HBs (Strats, Teles, LPs including P90 equipped models), a couple semi and full hollow body guitars with HBs and singles, acoustics and electrics with 6 and 12 strings and maybe even a bass guitar or two!
They don't have to be the best, most expensive or vintage models. Seek out the kinds of guitars you want to play and get the best you can afford.
To me, that's what a good guitar collection consists of.

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Guitars For Vets

Guitars as investments? In a few cases, that can pay off to varying degrees or it can be a money pit. The vintage market fluctuates with the local and national economy. Lots of "collectors" who purchased exceptional collector class instruments in 2007 with confidence that they would appreciate quickly are still stuck with them as they can't sell them to break even! There were wealthy investors from Japan and other countries buying up every pre-CBS Fender they could find, up until about 5 years go. When they stopped buying the bubble burst.

The key is scarcity & desirability. There must be some scarcity to it before it appreciates to any serious degree. For example with any Fender, that would mean a pre-CBS (pre-64) model. Unfortunately these have already appreciated! Any additional appreciation will result from fluctuating market conditions and deflation of the US Dollar. Therefore to obtain one you'd pay through the nose and then if you wanted to liquidate it it takes a while to sell it. Depending on how you acquire it you might do well to break even sometimes and might make some profit on others. But on some you may lose money!

How you go about acquiring them partially determines how much their value rises over your cost to obtain it. For example, buying through a vintage dealer or broker is usually the most expensive way to get your hands on a collector class instrument.

Alternative methods are to go on personal quests at estate sales, church auctions and the like or to watch internet auction sites and classified sites like craigslist. I know one collector here in NC who places newspaper classifieds advertising that he will buy old Fender & Gibson instruments and pay cash. Most of the stuff he looks at he declines to buy.

The problems with buying in alternate channels outside of the established collector market range from modified instruments to outright fakes. Usually any mod, such as a refinish or repair work or electronic mods, makes an instrument "Player Class" and the class distinction between Collector Class and Player Class has a very significant effect on current and future value. Vintage dealers, most anyway, are very forthcoming about mods and originality.

It is almost impossible to spot things that can downgrade an instrument's value merely by looking at photos online which makes internet auction sites possibly one of the most risky ways to buy a vintage instrument. But if you are at an estate auction and there is an old Fender or even several you will often be safe to bid up to what you consider to be 30 to 50% of the potential PLAYER CLASS value. It is not until the appraisal process that modifications become apparent and an actual appraisal value can be established. Even if a seller allows you to closely examine an instument, they are not going to let you do anything beyond that such as removing the pickguard or neck and such inspection is crucial to appraisal for originality.

There are no investment grade Fender instruments made since 1965 as there are just too many of them. That includes modern era Custom Shop. A new Custom Shop instrument that sells for over $4,000 new can often be had in the used market in like new condition for $2,800.

One notable exception I'm sure someone would bring up is the Fullerton made Vintage Reissue Series instruments which have turned out to be fair investments for people who bought them in 1983 and 1984. They are the fastest to sell of the CBS and post-CBS eras. But even then, when adjusted for inflation, there were better investments such as precious metals or US Savings Bonds in 1984.

With tangible assets like precious metals, stocks, futures and bonds there is an open market system for selling them almost instantly at the current market price. No such system exists for selling vintage collectible instruments. Hobbyists interested in becoming collectors see vintage dealer asking prices like $23,000 for a 1960 Stratocaster and figure that is what any 1960 Strat is worth. Actually if you wanted to sell that very same instrument as a private seller you'd be extremely fortunate to get $18,000 in a private sale for the same instrument! If you wanted to sell it quickly to a vintage dealer outright you could expect more like 12 to 15 thousand. If you put it on consignment with a vintage dealer listing an asking price of $23,000 and by some miracle it sold for the asking price then you'd clear about $20,000 after commissions and appraisal fees. but keep in mind that you have to expect that it would take a while to sell, perhaps a year or more!

The only reason to collect guitars is because you love them, not because you are going to make a killing in "the market" because odds are that you are not going to make a killing. That being said, the vintage collector market has seen a rebound in recent months, but still not back to the insanely inflated values of 2000-2006 and I'm not sure if those values are possible again in my lifetime.

I've touched on inflation above, but remember this. When adjusted for inflation the $300 (US) spent to buy a new Fender in 1966, adjusted for inflation, had the same buying power in 1966 as $2,200 (US) do now. Guess what? That is about the same thing a vintage dealer would offer you in an outright purchase for that same Fender instrument today! So where is the profit in that? After 46 years you break about even!

Amen to that, Strat Cat! I freakin' LOVE guitars - all kinds, shapes and pickups! I currently own about 70 different guitars, from Arbor to Washburn, lots of different colors, lots of different pickups. Right now I am really into set necks and humbuckers, but I still love my 24 Fender guitars. I would also add that I don't store my guitars away and never use them. I have room to hang about 24 in the Music Room right now and every hanger has a guitar on it. I get a mad urge to play different guitars about every 2-3 months, so I dig out old favorites and swap their places on the hangers.

I'm with you, too, Bill! I like cheap guitars, too, and have found some real gems for little money. Lately I have had even better luck, especially when the local Music-Go-Round has a 25% Off Sale. I hit all the pawn shops in town fairly regularly and the local GC, too. Every now and then I find a nice guitar at a cheap price, spend some serious time cleaning it up, maybe change some tuners or other small parts and I have a very nice addition to the collection.

I have 70s vintage guitars that I bought in the 90s for $50-$100 and I know I could make a tidy profit on some of those (relatively speaking), but I just can't seem to part with ANY of them. My son always tells me, just hang on to them, dad. Like I don't know where he's coming from... or what he's waiting for... very patiently...

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Dennis in CR
Rockin' since 1963

Another consideration is that vintage/valuable guitars have been in with baby boom era (and other) wealthy collectors for a few years now. In many cases, they've paid agents to go find their collection, and these people have become skilled at hunting them down. So you're working against these people and they may have quite a bit of money behind them. As already mentioned, vintage guitar shops will already have the price up there on anything known or likely to have value.

You might still find a gem (rare, played by a recognized artist, etc.) at some lawn sale or back room pawn broker. But not likely with nearly a decade of the wealthy boomers having pros scour the hills for anything ever touched by anyone we'd know.

A second point is that you'll need to know years, models and features. Sometimes a guitar from one year or in one configuration can be worth only a fraction of another nearly identical one of the same model. I was in a vintage shop recently and they showed me two ES-335s ... one a year older than the other. But that was tagged at $3,800 while the newer one was $9,800. Gibson had made a few tweaks, etc. from one year to the next and it happened that the more valuable one was the one hot with artists back at the time. So you can't go strictly by age or even the model.

Finally, remember that since some guitars are now quite valuable, there's value in attempting to fake one. If I knew a certain ES-335 was worth almost $10K, it might be worth my while to buy a much cheaper one if I thought I could transform it sufficiently to fool an amateur with money.

One only has to look at what Eric Clapton did the other day. Percentage wise, and dollar wise, he made more on one painting then he could ever imagine getting for all his present, past, and future guitars, and they have his name connected to them . I collect sub $1200 used guitars. Someday I can spend the rest of my life trying to sell them and maybe break even. Or, I can look at them as an enjoyable hobby that I spend as much money on as an avid golf player spends on green fees throughout the year.

Collecting pretty much ANYTHING is rarely, if ever, the best way to go as far as making an investment for the future. It takes time and effort to find the right items to buy for your collection, and when it comes time to sell, it takes even more time to find the right buyer, because you're selling to other people who have decided to collect what you collected. Also, as stated above, once you adjust for inflation, you'll be VERY lucky if you manage to come close to breaking even. The only real reason to collect something is because you lave that thing, and have a passion for it. Collecting is a hobby. Saving for retirement is not a hobby, it's a financial plan. Don't confuse the two.

I bought a season pass at my local golf course and could play every day, all summer long, for a grand total of $570. I spend a LOT more than that on guitars in the same short time frame...

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Dennis in CR
Rockin' since 1963

Nothing worse than a beautiful American guitar hiding under someones bead waiting for the right time to be sold. I unlike some folks, only have 5 and I love them all for what they are. Each one wonderful in there own way. You are corect in that they are a good investment. Butt not in terms of monetary value. There value is in the joy they bring every time I play one of them.
----Danny,

Before you decide on sinking a lot of money on a highly speculative pursuit....Try this exercise 1st...

Take a $1,000.00 and put it away in an Index 500 fund....
Take another $1,000.00 and buy a guitar of your choice which you speculate will increase in value..

At the end of One year, compare the two and add up which was the better return on investment.

I would prematurely predict that your Index 500 will be close to par in worst case scenario, but will have earned probably a 5% to 10% gain or more....
The guitar will lose acquisition value immediately upon purchase, I would estimate a 20% to 30% loss of the initial purchase value if not more....

OP.... you've actually answered your own thread question in your entry post by categorizing guitars as Durable Goods......

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"C'est parti mon Kiki "