With the recent inflation and recession worries, many investors are looking into alternative assets to hedge against market volatility. Cars, especially classic and limited edition models, are increasingly recognized as stable and lucrative investment options. From vintage Ferraris and Porsches surging in valuation to new supercars that can be instantly flipped for double the price, cars cater to both long-term collectors and short-term investors. This article will analyze the appreciating potential of classic cars, the profitability of reselling limited new releases, financing considerations, and other factors to evaluate cars as inflation-proof investments.
Classic Cars Follow a Steady Appreciation Trajectory Over Decades
Vintage cars from prestigious brands like Ferrari, Porsche, and Jaguar have seen their values skyrocket over the past decades. For instance, a Ferrari 250 GTO purchased for around $9,000 in the 1970s is now worth over $70 million. Even mundane classic family cars like the BMW 3.0 CSL have jumped from $3,000 to $150,000 in value. Unlike paper assets, these appreciate steadily rather than fluctuating wildly. As vintage cars become rarer over time, their valuation seems immune to recessions and inflation. While classics should be seen as long-term holdings, even short-term gains have been impressive – many vehicles double or triple in resale prices within just a couple of years.
Limited Edition New Releases Offer Quick Flipping Opportunities
For investors looking to flip cars in the short term for profit, limited edition models from brands like Ferrari and Porsche provide the perfect avenue. These manufacturers artificially restrict supply of special variants of their sports cars to boost prestige and demand. With waitlists months or years long, limited editions can be instantly resold by opportunistic buyers for sometimes double their retail prices. For example, the Ferrari 488 Pista had a price of around $250,000 but often resold for $500,000 or more. Astute investors pounced on this arbitrage opportunity. As long as production runs are kept low, buyers can expect extravagant price premiums for these exclusive cars.
Strong Credit and Financing Are Crucial to Afford Premium Cars
The eye-watering price tags of collectible classics and rare supercars place them out of reach for most investors. This makes financing and creditworthiness essential to securing ownership. A minimum credit score of around 580 is required for auto loans, but scores of over 700 will be necessary for the highest-end cars. Investors must ensure they have sufficient income and low existing debts relative to the value of the car. Leveraging financing allows investors to access appreciating assets they otherwise could not afford. But loans come with risks – delayed payments or defaults can lead to the car being repossessed.
Maintenance, Insurance and Storage Should Be Factored Into Costs
Owning a collectible car involves more than just the initial purchase price. Proper storage, preventative maintenance, repairs and insurance add to the overall cost. Investors should factor in expenses like climate-controlled storage units, specialized mechanics, spare parts, and collector car insurance. The older and more complex a car, the higher these ownership costs tend to run. But proper care protects the car’s condition and thus its resale value. Costs are offset by the lack of sales tax in some jurisdictions and capital gains tax exemptions when selling.
In summary, both classic cars and limited new releases represent potentially lucrative investment vehicles. Classic cars follow a trajectory of steady multi-decade appreciation, while limited editions offer short-term flipping profits. Strong credit and financing enable access to premium assets, but maintenance, storage and insurance costs should be budgeted for. For investors seeking an alternative to volatile stocks and inflation susceptible assets, cars present a compelling option.