Gold, stocks, and bonds are the haven for the people looking to maintain the value of their money during times of punishing inflation. With inflation numbers going up, behaviors of consumers change from high consumption to high savings. However, some people don’t follow the rational choice recommended by years upon years of crisis and choose an alternative form of investment. Cars are a depreciating good, and with time, cars lose their value due to bad maintenance, high milage, and high insurance costs. Yet, collectable cars are a whole different story. Collectable cars are unique and are presented with characteristics that vary greatly from your average VW golf.
Uniqueness, rarity, and historical legacy are the variables that drive the prices of collectable cars into an upward spiral. Most collectable cars fall into the category of luxury and performance; however, modern cars provide more of that due to the progression of engine and chassis technology. Yet, some modern luxury cars face extremely high depreciation in their first 5 years. As a result, modern luxury cars are a horrible investment, and those who can afford them will never enjoy the high resale value of a collectable vehicle.
Dreams of a 90s kid
The late 90s and early 2000s are the golden age of pop-up headlights and have seen the release of cars that set the stage for new levels of luxury accompanied by unrelentless performance. To car enthusiasts, the McLaren f1 and Bugatti EB110 are time-capsules with timeless designs. Those cars will still raise eyebrows when cruising down the street. At the time of their release, the F1 was valued at a million USD and the Bugatti sold for 500 thousand without the extra options. Nowadays, those two go for a whopping 20 million USD and 2 million USD respectively and are only expected to go up in value. So, why did those cars uncontrollably increase in value? First, those cars were not massively produced, meaning that they were only available in limited numbers. They offered unprecedented performance, earning them an entrance to the exotic car category.
The EB110’s engine offered high performance for the time, aided by 4 turbo chargers. However, modern Bugatti’s offer the same formula, pushing the limit of Speed and acceleration to unforeseen limits. Unlike the Bugatti, the F1 was naturally aspirated, meaning that it lacked the turbochargers installed into the Bugatti engine. The lack of turbochargers doesn’t mean that the F1 is incompetent, as the car still holds a record that is yet to be broken my modern-day cars. The F1 was released in 1989, and it is still considered to be the fastest naturally aspirated car to date. Those aspects have helped keep the prices of those cars in an upward spiral, rendering a perfectly odd investment opportunity to car collectors.
Moreover, the historical legacy of some cars have helped in maintaining their value greatly. Initially emerging on the racetrack, the Lancia integrale and the Ford GT40 showcased a new level of track performance that was never seen before. Both cars were made to dominate the racetrack, and they excelled at their missions. The Lancia won a total of 46 world rally championships during its time of service, sweeping the floor with its competitors from Audi, Toyota, and Peugeot. The more known Ford GT40 was made for the sole purpose of winning the 24 hours of lemans, a race that was dominated by Ferrari for years. Since both cars excelled at their jobs, they gained great public approval, and demand for them to be released for the road increased. However, the technicalities of the cars made it illegal to drive on the road, leading the owning companies to homologate the cars and release them to the public. Homologation is the process of specking out race cars in order to become road legal, this includes tunning down their power and adding safety features. Nowadays, those vehicles’ values have increased substantially, pushing them towards the 6-figure and even the 7-figure zone if found in good condition.
All of the cars mentioned above, and many others from this era lack something that modern day luxury cars excel at, and that is utility. You can’t drive across cities without having to endure the soaring fuel prices, neither can you fit your newborn in the back seat (Most of those cars came in a two-seater form). Modern day luxury vehicles offer great utility, accompanied by the comfort of daily driving, yet still your hard bought Maserati will most likely lose 50% of it’s value across 5 years!!!
Call the tow truck!
Modern luxury vehicles, including luxury SUVs and sedans are known to lose their value greatly. Luxury brands including Maseratis, Ferraris, and even Rolls Royces lose their values significantly no matter the amount of maintenance and care put into them by their owners. This comes to several factors that include reliability, abundance, and new technologies. Almost all Maserati models lose their value at an accelerating rate despite being well built and precisely designed. Those cars are not built like daily drivers, their engines are extremely sophisticated to work with and are very pricy to maintain. The complexity of the engine gave the brand a bad reputation, as drivers will have to endure constant engine problems. Ferrari, a brand known for delivering blistering performance and unmatched luxury, faced a similar issue with one of its models.
The Ferrari FF introduced a revolutionary design, as well as the worst transmission system fitted into a car. The FF came with two freaking transmissions, TWO SEPARATE transmissions! This made the car hell on wheels for the local mechanic, and only a Ferrari Maintenance center can fix or replace this potentially faulty transmission system, and boy is it not cheap! Furthermore, performance luxury vehicles are fitted with new technology each year, rendering older models obsolete. The emergence of hybrid and electric vehicles have pushed the value of internal combustion vehicles down. This constant technological progression make older models less desirable in comparison to the newer models, as the latter offers more comfort, reliability, and speed.
Conclusion
Here you have it, modern day luxury vehicles are far from a good investment, and they pale in comparison to older, legendary cars. However, you should always remember that modern cars are never an investment option, and even if your boring corolla has gone up in value, it’s only due to inflation. Entry level performance luxury cars fall into the goldilocks zone for the average joe, offering acceptable performance and comfort at a much lower price point. So, if you belong to the 1%, it’s safe to say that buying a McLaren f1 is a good investment option, given that you don’t crash it. If modern day slavery got a hold of you, a BMW M2 will deliver incomparable fun with a bit of luxury and day to day utility.