Sylvain Tornare

Oct 25, 20214 min read

Is a Car a Good Investment?

Updated: Jan 19, 2022

A car is an asset that generally loses value over the years and with use. Our recent articles have shown it. But is it possible to earn or at least not lose money on a car? This week we look at this topic.

Carequest Sàrl car broker Switzerland, Porsche 911 993 Carrera in grey

The costs associated with the use of a car usually amount to thousands of francs per year. Depreciation, which is higher in the first years of ownership, is a major component of this figure. However, some exceptional models have proven that value can increase. One can look at the sales prices of McLaren F1, Ferrari LaFerrari Aperta, or other exceptional vehicles. Yet, it turns out that some more affordable models are also on the rise. This article presents a selection of them and discusses the reasons for this trend.

Why does a car increase in value?

Rarity

It seems logical that the scarcity of a vehicle has a positive influence on its value. That is consistent with the basic principle of supply and demand. The more demand exceeds supply, the higher the price.

Short to medium term, a vehicle may increase in value due to low production. Manufacturers' will or difficulties in the supply chain can be the reason for it. In the long term, a car produced in large numbers can also meet this criterion. Over the years, vehicles in good condition and with relatively low mileage become rare and can therefore increase in value.

However, not all rare cars appreciate. For this to happen, the vehicle, its make, design, driving experience or heritage must be attractive to create sufficient demand.

Driving experience

The new measures put in place by governments to fight against climate change have forced manufacturers to find new propulsion systems (#electriccars #hydrogencars). In addition, the evolution towards a digital world has resulted in increasingly connected vehicles, for which the driving experience can become secondary. For example, a car produced in 2001 offers a different experience to one from 2021.

Older models tend to be seen as more engaging than newer ones. That is due to the lack of technology and driver assistance systems, but also the power units. Typically, it is now rare to find a V8, V10 or V12 in a vehicle that is not a supercar. Fifteen years ago, this was not the case. As a result, these vehicles have begun to attract a wider range of people, thus resulting in a potential increase in their value.

Heritage

The origin of a car and its significance in automotive history can also influence its value positively. That typically includes a particular designer, racing victories, a partnership with another brand, a technological milestone, etc. Its heritage must give the vehicle a unique character.

An ageing generation

Part of the generation, which grew up in the 1990s and 2000s, now has the purchasing power to buy the cars they dreamt of as children. That increases the demand for vehicles built in these two decades. Thus, a model that has initially fallen in value can appreciate later on.

US imports

Vehicles that are 25 years old or older can be imported easily to the USA. Before that threshold, the process is costly, time-consuming and complex. Even though the share of Swiss vehicles exported to the US is small, this system increases the overall demand for specific models.

Which models follow a positive trend?

The list above has presented some elements that can positively influence the value of a vehicle. However, one should account for other criteria too. One of these is the general condition of the vehicle. It typically includes the mileage, its visual and technical condition, the quality of its conception or its reliability. Only cars in excellent condition represent an interesting investment. Moreover, a vehicle with prohibitive maintenance costs is less likely to increase in value than one that does not suffer from this problem.

Over the last few months, mainly vehicles from the 1990s and early 2000s have appreciated. This can typically be attributed to some of the explanations listed above. Below is a non-exhaustive selection of models whose value has recently stabilised or increased:

Conclusion

This article has shown that a car can be a good investment. In general, four main elements seem to influence the value of a vehicle positively.

Rarity
A driving experience that modern vehicles no longer offer
Its heritage and significance in automotive history
The ageing of the generation that grew up dreaming of these cars

If one or more of these elements are present, the basic conditions are met. However, one should not forget that the majority of cars remain depreciating assets. Even if some examples of a model have seen their values rise, this does not mean that all of them will follow this trend.

In conclusion, only a minority of vehicles represent an investment with a potentially interesting return. However, it is good to be informed about the market to minimise costs and take advantage of trends.

At Carequest, we know the market. If you are looking for a car for transportation, fun or investment, contact us! We will find the right car for you!

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