Sunday, 25 January 2015
Received wisdom is that the best way to make a small fortune is to start with a large one. Although usually cited as an example of people frittering away their wealth but it also conceals the truth that it takes money to make money.
Consider the cars people buy; ten years ago a ford Focus ST or Mondeo Turbodiesel for about £19,000. Prices for the Focus today are in the region of £4-5,000, the Mondeo could be had for £1,000 or less. That, as you’ve probably worked out, is £14-18,000 lost in depreciation if you bought new and kept the car all that time. Although depreciation is non-linear it works out as costing at least £1,400 on top of the other running costs.
Contrast that with the 2005 Ferrari 575 Superamerica that sold at auction last week for $517,000, which works out at about £345,000. The list price for the same car when it was new was £191,000 (or £198,800 with the F1 gearbox). Rather than losing money that is an increase of £14,700 a year on average. It might not be a large fortune but it is better than nothing.
Of course, to make that money you need to be in the position to buy the Ferrari in the first place. You also need to choose your car wisely, if you’d gone for an ordinary Ferrari 575 you’d have saved about £40,000 initially but that car would only be worth £90,000 today (only!). It also makes me wonder if anyone leased a 575 Superamerica and what the monthly payments are like on a car that is going up in value.