Saturday, February 26, 2011

The Law of Depreciation

The law of deprecation is a car enthusiast's best friend. Cars that were $50, $60, even $100 grand ten years ago can be had for pennies on the dollar today.

I was reminded of this fact recently while browsing car ads online and realized there are a number of 1997-2000 Porsche Boxsters for sale below $10,000. Ironically, one of my favorite affordable Porsches, the 944, is appreciating towards that amount. So today you can have your pick--Boxster or 944 for the same money.

I know I'd take the Boxster. As much as I love the 944 for its mix of performance, handling, practicality and reliability, the Boxster includes all those traits and has Porsche's iconic flat-6 engine mounted mid-ship.

But it's not just Porsches that experience the phenomenon of depreciation. Just about any car hits its low value when it reaches 10-15 years old. In the 1970s, you could pick up a V12 Ferrari or Jaguar E-Type for the cost of a new Ford Pinto. In the 1980s and early 1990s, muscle cars and 1960s Corvettes were cheap. Now all of these cars are approaching the price of a three bedroom house, or far more in some cases.

Today you can find all kinds of bargains as well. The Porsche 928 and BMW 8 series are in the same price range as the Boxster, as are the Jaguar XJ and XK8. Or if you like American iron, you can pick up a C4 or C5 Corvette, Mustang Cobra, or Camaro Z28 for the same money.

The downside is as the Romans said, "caveat emptor"--buyer beware. All of these cars are at least ten years old and have close to 100,000 miles on them. They may have been lovingly cared for like someone's pet or abused like a Taliban donkey. And you won't know which without taking it to a good mechanic and spending several hundred dollars on a thorough inspection.

We also don't know if these cars will ever appreciate in value, becoming valuable collectors items. Certainly they have the potential, but for now, they should just be cared for and enjoyed.

No comments:

Post a Comment