Hello ladies and gentlemen of Jalopnik and welcome to Letters to Doug, your weekly column where Doug responds to letters such as F, Q, R, and B.
Ha ha! I am just kidding. This column involves Doug responding to your letters, which you can send me at Letters2Doug@gmail.com. I’m happy to answer any automotive-related inquiry, though I must admit that any mechanical question regarding your first-generation Volkswagen Touareg should instead be directed to a team of trained scientists and engineers.
Today’s letter comes from a reader named Philip, who writes:
I noticed you only include letters in your columns that have compliments for you in the first paragraph. So here’s mine: your columns are good and your videos are decent.
Now onto my question, what’s the best car to buy as an investment? In other words, what car can I buy today, drive for 5 years, and then sell it for the same price or more than what I bought it for? My vote is for Acura NSXs, which have been 60 grand on AutoTrader since Bush was president. Another possibility could be coupes and sedans from the 70's and 80's, which are soon to become “classics” soon like cars from the 50's and 60's are now. What do you think?
Philip, your question is asked a lot in the automotive community, and you’ll find that dozens of people have hundreds of different answers for it. Me, I’m going to go out on a limb and tell you something you might be surprised to hear. Which cars are good investments? The answer is… none of them.
Let me tell you the problem with the NSX you’re talking about. Let’s say you buy it for fifty grand and sell it three years later for fifty-two grand. This is great! You’ve made two thousand dollars on a car, which is a tremendously unusual and unlikely scenario. You’re over the moon! You’re ecstatic! You’re thrilled!
Only, there’s a problem: you actually lost big.
Let’s start with the obvious: sales tax. In the vast majority of U.S. states, the sales tax bill on that $50,000 NSX is something like $3,500, which means you’re in the car for $3,500 before you’ve even had it for a month. Now, I personally have never purchased a used car without having to do something to it, so let’s say you’re looking at another thousand dollars right off the bat to fix some long-broken part the previous owner ignored, or to bring something back to stock that the previous owner modified. Now you’ve spent $4,500, and you’ve had the car for maybe 30 days.
Next up: insurance. I’ll be generous and say that insurance is an additional $900 every six months, even though I have no doubt it’s actually a little more expensive to insure a valuable older car like the NSX. In the three years you own your NSX, that’s another $5,400. Add in annual registration fees (let’s say $250 per year after you buy it) and yearly maintenance (let’s call it $1,000 per year) and it turns out that you’ve spent $13,300 to own your NSX for three years. Suddenly, your $2,000 profit doesn’t seem so great, does it?
Now, I fully admit that spending $13,300 and gaining $2,000 – for a total loss of only $11,300 over a three-year period – is actually a pretty good situation for a car. It’s certainly much better than buying a used CL65 AMG, spending $18,000 over three years to keep it on the road, and then losing something like $20,000 in depreciation.
But let’s be clear: in neither case is your car actually any sort of “investment.” Especially when the Dow Jones Industrial Average returns about 7 percent per year on average, which means you could’ve taken that $50,000, invested it, and turned it into $61,200 over three years.
I know what you’re thinking: But so many people make money on cars! How do they do it?
Here’s how: they buy cars that you and I can’t afford. The difference between a real automotive investor and you is that the automotive investor purchases a 1926 Hispano-Suiza Model F-27 that was owned by Ingrid Bergman and Mr. Ed, the horse. He does not drive this car. He keeps it in a locked, climate-controlled garage, his detail guy cleans it every few weeks, and three years later he brings it to Pebble Beach where it comes in third overall. Then he sells it at auction and makes $600,000.
You and I will never make $600,000 on a car. You and I will never have the opportunity to make $600,000 on a car. And more importantly, any car you and I will buy that could potentially have $600,000 attached to it in any form will be driven, enjoyed, and experienced, which does nothing to improve its value.
And so, a lesson for those of you looking at cars as investments: you are absolutely insane, because you will never make any sort of actual money buying cars with any sort of normal budget.
Unless, of course, you get a first-generation Volkswagen Touareg. It has nowhere to go but up.