RESPONSIBLE COOL CAR INVESTING
Just as some people think the simple real estate strategies we discussed last week are out of their price range or beyond their investment knowledge, buying a cool car is also much simpler and less expensive than we, and our neighbors, think.  And speaking of neighbors, when you bring home your Porsche 911 Turbo, know that they will say you are not being responsible and are likely having a mid-life crisis.  Instead of telling them to worry about their own, boring life, just smile in the knowledge that you are spending way less than they are with their "regular" leases.
     Just as in stock investing and home buying, with cars most of us make a long list of mistakes.  Buying the exotic car is another area where a little education can put us far ahead of the crowd.  The problem is that for most of us, no one has ever explained it to us, so here's how I learned about it many years ago.
     My second year in the investment business, the Wheat First Securities Training Department asked me to travel to Richmond, Virginia, to speak to the new rookie class of financial advisors.  As I crossed the busy street to the Riverfront Plaza high-rise offices, I almost stepped in front of a cool Ferrari being driven by none other than our CEO, Marshall Wishnack.  At the close of my presentation, I enthusiastically said to the new class, "And, to prove the great potential for you in this business, I just saw our CEO zip into the parking garage in a gorgeous, new Ferrari!  This is the greatest business in America!"
     The next day back in the office bullpen I received a phone call from Mr. Wishnack.  I thought for sure I must be getting fired!  Instead he said, "Listen, Martinovich, if you're going to tell the story, make sure you get it right.  It's a Lamborghini!"  He then proceeded to explain the simple economics of responsible cool car investing.  Below is my attempt to pass on his wisdom.
     First, here are some recent results on buying or leasing a new BMW, Mercedes and Audi, all which the neighbors feel are reasonable choices:

1.  The BMW 5-Series selling for $30,846 after 3-years depreciation of 52.6%.
2.  The Mercedes E-Class selling for $34,010 after 3-years depreciation of 49.9%.
3.  The Audi A3 selling for $21,120 after 3-years depreciation of 47.9%.

     Above, we have spent roughly $30,000 plus maintenance and repairs, depending on our arrangements.  Most cars have a continual declining value curve, but higher-end cars may follow a "j-curve" value path.  If we wait three or four, or even a few years more, to purchase these automobiles, many times the bulk of the depreciation has already occurred, and the price will stabilize forward.  We may realize very little decrease in value while we own and enjoy these vehicles, and in special situations we may even experience appreciation in value.
     So, these purchases may, economically, be little different than holding that same capital in the bank at 1/2% interest, and can be brilliant investments when compared to the above "more sensible" purchases.
     For example, a Ferrari 360 Modena purchased in 2004 for $160,000 could be picked up today for $70,000 with very low mileage, and will likely hover around this same price for the next year or two.  Older 308 and 328 Ferrari models which could have been purchased for around $40,000 a few years ago, are now hard to find under $60,000 (the curve turned back up).
     A 2008 Porsche 911 Turbo with 520 horsepower and low mileage can also be picked up for $70,000 with little to zero decrease in value the next few years.  A 2002 Aston Martin Vanquish V-12 (Bond, James Bond) with 460 horsepower can be acquired under $70,000 and enjoyed for very little in depreciation.  We can be patriotic and purchase an awesome American-made 400-horsepower V-10 Dodge Viper for $40,000, and every Saturday ask our spouse, "Are you sure you don't have more errands I can run for you?!"
     Car expert, Doug DeMuro, a few years ago bought a Ferrari 360 Modena to test all of the true expenses.  He paid $86,500 and sold it a year later for $78,000 after driving it for 5,022 fun miles.  He spent $4,629 on repairs and maintenance because he decided to replace the tires and front brakes, along with two oil changes, expenses in the same ball park as the BMW.  He claimed his depreciation would have been less than $5,000 if he took his time on the purchase and sale.
     Neighbors spend $300,000 on a boat, which is an economic hole in the water, while trying to make you feel guilty about spending $10,000 on a Porsche or Aston Martin.  Don't fall for their jealous, misguided opinions.  They know not what they do.
     You work crazy hard, you are a good person, and you deserve to treat yourself to things while not worrying about what the rest of the neighborhood might say.  Now you know how to do it cheaply, responsibly, and less than your neighbors are spending, themselves.  Now someone has told you, and you know, too.  No excuse!
     My son, Cole, and I would start many sunny Saturdays by driving the 7-year old Ferrari 355 Spider to Subway's for an early lunch and then off to do the errands list.  We made it last much longer than necessary. I always thought, "Mr. Wishnack would be proud."
     Have a great week, and send us a great story of your next purchase!

"Yesterday is not ours to recover, but today is ours to win or lose."  -  Michael Rowan