Here’s the latest reader question, along with my reply!
Yvonne asks: I’m worried about the value – the buying power – of my cash savings being eaten away by inflation and am thinking about buying a classic car as a way to hedge against that. What are your thoughts about this as a strategy to preserve wealth?
My reply: I think it’s a very sound strategy to have tangible assets of fungible value – meaning, things which are valuable as such and which can be exchanged for other things of value.
A classic car is generally a sound investment, in normal times. They are collectible, like art – and it is probable they will always be so, like art. Assuming normal times. But we live in abnormal times and the value of collectible things may go down, a lot. As much as a ’70 Hemi ‘Cuda is a beautiful thing it is also a useless thing in a Weimar Germany/Venezuela today scenario. It is not useful for transportation, even.
That said, an older vehicle that’s useful and practical could be extremely valuable – as well as fungible. Any car that is simple to maintain, that is very fuel efficient – and perhaps can run on a variety of fuels, as is the case with older diesel-powered cars. A truck that is capable of performing work is another good one.
Both are also probably safe ones – in that it’s not likely you’ll money buying either. Worst case – things settle out/chaos does not ensue – you could always sell them and get back whatever you spent, or close to it.
The main thing here is to focus on daily-driver vehicles – not show cars/trailer queens. Those are fine to collect – and they can appreciate in value, often a lot. But in a worst case scenario, they’re probably not going to be worth much.
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Hey Ya Eric!
Much as I love classic cars and would love to be driving one, personally, I don’t think they are going to be a hdge against inflation as they were in the past. The price to purchase such cars is about the highest it’s ever been, and the real-life market has been kinda stagnant for quite some time. I think that we are going to start seeing a steady drop in prices very soon, as the generation who comprise the majority of people who are interested in such cars, and have the wealth to pay a lot of money for ’em, are dying off, and not being replaced -as the younger generation tends not to have the interest nor the wealth.
I do agree that buying a reasonably-priced old car(s) to just drive (as opposed to newer cars) is a good idea, of course, but I think Yvonne is looking for something that will be an investment…which a daily driver is not.