I’ve always thought of investing as something boring wealthy people do. I get the benefit of it, but as a not-so-rich guy, it’s not something I’ve ever put thought into. However, I can totally get behind this new investment strategy from some German bankers.
That strategy is to invest in classic Porsche cars. “For customers with more than 1 million euros in liquid assets, a classic car can be an attractive addition to their portfolio in terms of yield and value stability,” Jens Berner, a vintage car expert at Suedwestbank AG’s asset management unit, said in an interview. “After the financial crisis, requests for alternative investments such as art, wine, or classic cars had risen sharply.”
The Appeal of Classic Cars as Investments
Classic cars, particularly iconic models like the Porsche 911, have a unique allure that goes beyond their aesthetic and engineering excellence. They represent a piece of automotive history and culture, often evoking nostalgia and admiration. This emotional connection can drive demand and, consequently, value. Unlike traditional investments such as stocks and bonds, classic cars offer a tangible asset that can be enjoyed in a very personal way. You can drive it, showcase it, and even participate in car shows and rallies, making it a lifestyle investment as well.
To prove that these cars can be sound investments, an OTC Classic Car Index was started for cars at least 30 years old. The index found that owners of classic Porsche 911 autos have seen their drivable investments gain 683% in value over the last 13 years. This remarkable appreciation outperforms many traditional investment vehicles, making classic cars a compelling option for diversifying one’s portfolio.
Factors Influencing Classic Car Values
Several factors contribute to the increasing value of classic cars. Rarity is a significant factor; limited production runs or models with unique features tend to appreciate more. The condition of the car is another crucial element. Cars that have been well-maintained or restored to their original condition are more likely to fetch higher prices. Provenance, or the car’s history, can also add value. For instance, a car previously owned by a celebrity or one that has won prestigious awards can command a premium.
The bankers suggest investments in cars of a minimum value of 100,000 euros. This threshold ensures that the car is of a certain quality and rarity, which are essential for long-term value appreciation. Additionally, classic cars often require specialized maintenance and storage, which can be costly. Therefore, having a substantial initial investment can help cover these ongoing expenses.
Another aspect to consider is the market trends and economic conditions. During economic downturns, the value of luxury items, including classic cars, can fluctuate. However, as Jens Berner pointed out, the demand for alternative investments like classic cars surged after the financial crisis, indicating their potential as a hedge against economic instability.
Investing in classic cars is not without its risks. Market trends can be unpredictable, and the costs associated with maintaining and insuring these vehicles can be high. However, for those who are passionate about cars and have the financial means, it can be a rewarding and profitable venture.
In conclusion, while traditional investments remain essential, diversifying with alternative assets like classic Porsche cars can offer both financial returns and personal enjoyment. The significant appreciation in value, as evidenced by the OTC Classic Car Index, makes this an attractive option for wealthy investors looking to add a unique asset to their portfolios.
via Bloomberg
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