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.
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