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Customizing a car can hurt resale value

By Claes Bell · Bankrate.com
Wednesday, October 27, 2010
Posted: 5 pm ET

In case you haven't heard, the 2010 Specialty Equipment Market Association, or SEMA, Show is coming up next week. Car fanatics from all over the world look forward to the show, mostly because it sports some of the wildest and most beautiful custom cars anywhere, put together by the very best shops on the planet and supported by big money from automakers.

SEMA hotrods like this modified Ford Focus are awesome, but customizing your own car can be costly

SEMA hotrods like this modified Ford Focus are awesome, but customizing your own car can be costly

Looking at the amazing creations at SEMA may put thoughts into your head about what your own car would look like with candy paint and gleaming rims. But, like the demented Santa in A Christmas Story grumping "You'll shoot your eye out," at Ralphie, I'm going have to point out that from a financial perspective, modifying your car isn't a great investment.

That's because car modifications involve a great deal of risk to your resale value without much financial upside. You may think, "Man, if I spent a lot of time getting a car perfect, I'd never sell it anyway, so resale value doesn't matter."

But it doesn't take too long leafing through the car classifieds to find an ad for an absolutely gorgeous custom two-door with some version of the forlorn words, "Wife just had baby, must sell." It's hard to predict when the time will arise that you'll need to sell, either because of financial circumstances or, in the case of new dads, changing transportation needs.

The problem with trying to sell a customized car is that it's just that -- customized for your wants and needs.

"Generally speaking, when you customize your vehicle, you're reducing the target marketplace for the vehicle as a used car," says Eric Ibara, director of residual value consulting for Kelley Blue Book, publisher of kbb.com.

On the other hand, car companies spend millions of dollars trying to create cars that will appeal to large swaths of the car-buying public. No matter how devoted or dedicated a gearhead is, they probably aren't going to be able to improve much on the marketability of the car they're modding. That's not to say they won't make the car subjectively or even objectively better, it just means that they're unlikely to make it appealing to a broader audience.

What that translates to in the real world is that when it's time to sell, the car that you've sunk thousands into customizing could be worth only slightly more than a milquetoast rental fleet version of the same model.

"When you add very specialized equipment to your vehicle, you potentially could get little to no additional money for it, or have people just not consider the vehicle for purchase," says Ibara.

In some cases, if the changes you made are too ... individualized, it can even hurt your resale value.

"Something that drastically changes the appearance of the vehicle, and not in an attractive way," could mean you get less for it than you would had you left the car well enough alone, says Ibara.

Of course, there is the possibility the modifications you make to your car are so positive that you'll actually add value above and beyond what you pay for them. Or that you'll find a buyer who was looking for a car with similar modifications to the ones you made, and so is willing to pay a premium. But the more likely scenario is you lose most of what you paid to customize your vehicle, with the possibility of losing even more if the marketplace doesn't like them.

And let's not even mention the labyrinthine process you'll need to go through for an auto insurance plan that will cover anything beyond minor modifications in the event of an accident.

So if you want to drive a SEMA-show dream car, go ahead, but do it without the illusion that you're likely to get back the money you spend when it's time to sell.

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