It sounds crazy right?
Most of us are taught that automobiles are depreciating assets. We should always buy used, and new cars lose their value right when they roll off the lot.
There's a lot of truth to that. But one truth often not talked about? Classic cars.
While the following will sound like a search-friendly title on eBay (EBAY) , many rare, vintage and classic cars actually appreciate over time rather than depreciate. That's contrary to what many of us are taught about when looking to purchase an automobile.
Of course, we have to take it in context too. We're not talking about plunking down big bucks on a classic Porsche or Mercedes as your daily driver, with the hopes of cashing it in down the road for more than you paid for it.
However, there is value to be found in the category. To show how well these assets can perform, one bank went as far as to create an index for it.
The Classic Car Index (OTX) from Suedwestbank AG keeps tabs on 20 vehicles that are at least 30 years old and are produced by automakers in southern Germany. That's companies like Audi, BMW, Porsche and Mercedes.
For those wondering how the OTX has done, it's crushed other assets. For instance, from January 2005 to 2018, the index quadrupled, with values rising 300% overall. The German DAX "only" rose about 200% in that period, while the S&P 500 ETF (SPY) is up just 121%. That's also better than the Nasdaq Composite, which is up about 220% over the 13-year period.
Ironically, the index has also performed better than the automakers themselves, topping the 77% rally from Daimler (DDAIF) , as well as the rallies from BMW (BMWYY) and Volkswagen (VLKAY) (which owns brands like Audi and Porsche).
So which car performed the best? The classic-classified Porsche 911, which appreciated almost 700% over that 13-year span. That's a bit under Alphabet's (GOOGL) (GOOG) ~940% rally in the same time frame and easily tops Facebook's (FB) 360% performance, although the social media giant only went public in 2012.
Still, it's worth pointing out that not every car purchase has to be money down the drain. For investors who do opt for some Jay Leno-esque diversification, they may want to consider some other factors of classic car ownership.
For starters, there's maintenance and insurance costs, along with keeping it properly stored. When it comes to stocks, we don't have to worry about storage, while the only fees we usually encounter come from commissions and management/fund fees. Many stocks also pay dividends and unfortunately, our classic cars do not.
But we also can't take our shares of Netflix (NFLX) out for a weekend spin and listen to it purr down the road. So there's that to consider, too.