+395% Return on Investment: Cars

If you could get a return on investment that would work out to nearly +400% over ten years and wouldn’t cost you an arm and a leg would you be willing to do it? Who wouldn’t? There’s nothing that can bring in that sort of return on investment in such a short space of time, no matter what you try and do. What are we talking about? Gold? The stock market? It’s nothing even remotely like that. In fact it’s just cars. It’s not your common-or-garden variety, though, that you drive back and forth to work in every day, but collectable cars.

Luxury Index

  • The price of classic collectable cars has increased unbelievably by 395% in the past few years and in the last year alone they have seen an increase of 28% (June 2012 to June 2013).
  • The Knight Frank Luxury Index (set up this year and which tracks the variation on prices of luxury products in the world) has seen the index increase by 7% over the past 12 months due to classic cars alone.
  • Over the same period of time housing in prime locations in cities like London have only increased by 135%.
  • The FTSE 100 has seen a 55%-rise over the same June 2012 to June 2013 period.

    Cars: High Return on Investment (ROI)

    Cars: High Return on Investment (ROI)

High-Net-Worth Individuals

High-Net-Worth Individuals (HNWIs) are the driving force behind the increase in the prices of the luxury-classic-car market and they are more and more out to get the object that they can both use and in which they will see a yield on their investment. It’s not just a question of buying a luxury item and using it, but the value increasing too.

Not Just Cars

It’s not just cars however, but also coins and stamps that are being bought up since they are good returns on investment never seen anywhere before. Wasn’t stamp and coin collecting for the boring people and train-spotting type-geeks (before the word had even been invented) at one time? The real people in-the-know and who had the money went for luxury wines and watches or jewelry. Stamps and coins have doubled in value over the past decade, however.

  • Watches have only increased by +4% in the past year (June to June 2012-2013) in the luxury-market sector.
  • Wine did even less well at +3% over that period.
  • Art was something that should have been dropped as it fell over this timespan by -6%.
  • Gold fell by -23% over the period.
  • However, gold has increased by 273% over the past decade, but is still not a patch on collectible cars.
  • Antique furniture fell by -3%.

Investments of Passion

Investments of passion are what they’re all called. Increasingly interested in them, the wealthiest people in the world seem to be in favor of finding a passionate outlet for their money in the economic hardship after the financial crisis. Despite the fact that there are doubts over whether that financial crisis has actually affected the rich today. There are more billionaires in the world than ever before today with 2, 170 people that have that sort of net worth today and those people have a combined wealth that stands at approximately $6.5 trillion.  Passion and pleasure have become the order of the day in the financial situation our countries find themselves in, with growing debts and dwindling finances and revenues.

The highest prices are being paid by the super-rich Chinese today according to the index. A Patek-Chronometer watch fetched $4 million in November 2012 at Christie’s Auctioneers in Geneva. It was bought by a Chinese investor.

Better than Gold?

Some might well be asking if these investments of passion would be able to turn investors away from gold or other traditional forms of increasing your earnings. Admittedly, nothing is certain of increasing in the investment-of-passion world, because it is based upon passion and its collectability is determined by how many others have a passion for the same object. But, there are no certainties either with investing in the stock market. When all is said and done, if you’re buying an investment of passion and it doesn’t increase in price, then you still have the passionate object. If the stock market drops, you just end up with a worthless piece of paper and a few tears to dry.

Don’t make the same mistake as billionaire Warren Buffet who decided against investing and buying the Harrah Car Collection which included 1, 400 cars. There were masterpieces of historical engineering and admiration such as a 1932 Rolls-Royce Salamanca or the 1913 Pierce-Arrow. It would only have cost him $1 million, which was just peanuts even for him back in the 1980s. His fateful mistake became reality when the collection sold (in part only) at auction just a few years after he turned the offer down and it raked in the tidy sum of $69 million. The classic-car market is a collection of good investments and there are few that have even cottoned on to it. Buffet always had a good nose for a great investment, but he went wrong on this one. These cars are finite and the prices have skyrocketed over the past few decades.

The reason for the rise in prices is the increased interest and the fact that people are starting at last to realize that cars if they are collectable and classic, are worth a mint. Demand has increased and the number has remained the same. If you can’t afford a collectible today, then remember that cars of today may just become the collectibles of tomorrow. Nobody ever imagined for one moment that the Datsun 510 would end up a collectible car in their wildest dreams; but it did.

An Aston Martin DB5 was estimated at nearly $16, 000 in the 1980s. That has increased today to around $480, 000. The most highly-priced car sold at auction in July 2013 at Bonhams in the UK for the princely sum of $31 million. It was a 1954-Mercedes Benz.

Don’t be fooled into thinking that good investments are necessarily where we have been told to look. They might just be sitting somewhere in a garage hidden away too waiting to be revved up. If all else fails, buy a matchbox.  



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