Hypothetical question on Porsche purchase vs invest money in fixed term account

[Lucky Phil]

Ok so here is a beautiful 964 Turbo (3.6) for sale at Duttons (see link).  10000 KLMs

Lets say I happen to have $649,990 handy at the moment from the sale of a house.  What would be the vote on investing the money in the car vs invest in a fixed term deposit account (share market off limits for the moment).  Interest on the money in a fixed term would be 2.5% (at best) for the next 2 years.  I could drive the car occasionally to Porsche events etc but would most likely store it and flip it in 2 years.  Having regard to insurance and registration etc. what would be the consensus?  I know you guys are P Car crazy but I am interested if the car is the better investment, so use your brains and not your heart, so as I can have a fair dinkum result.

Vote either CAR or FIXED TERM.  

https://www.carsales.com.au/dealer/details/Porsche-911-1993/OAG-AD-15888570/?Cr=0

[bear924]

As someone who appreciates Porsches and does consider future values when purchasing, I would suggest you are comparing apples with oranges. In my mind:

Investment - The purchase of an income producing asset which has a value determined by the expected future cash flow of the investment.

Speculation - The purchase of a non income producing asset in the hope that a 'greater fool'* will purchase said asset at a higher price.

I may be purchasing a new Pcar speculation next week, however I am purchasing with the expectation that prices will soften in the not too distant future and that my primary purpose of purchasing is to enjoy the car. Therefore, I would only purchase the 964 if you wanted to own and enjoy a 964 and would be happy to sell it for less than your purchase price when finished. 

Therefore my vote is FIXED TERM ... even though, in reality, I feel there are better investments out there and would purchase neither as an investment.

* - My reference to 'greater fool' is referring to 'the greater fool theory' of investment, not suggesting anyone past, present or future person on this forum or any related Porsche activity is a fool. 

[rego]

The market for a car like that is small and it would be a process to sell at any time but if the economy goes to hell for some reason while you are holding onto it you'd probably lose a lot or be forced to hold onto it and pray the values come back.

If you don't think the economy is going down buy an index fund and smash a fixed interest rate.

[MARTY]

I would say you buy something because you like it in the first place and if it goes up in value along the way then all the better,I’ve got to say the car in question looks absolutely amazing.

[JWM]

Agree with above from bear. In a comparison like this, might as well also consider taking it all to the casino imho... 

[Dreamr]

The biggest issue I see with the 964 is the price bracket ...

Not too many people have the means to purchase a car like this .... out of those you have to find the ones that like Porsche .... out of those you have to hope that a 964 is on their radar .... etc, etc.

I know that I don't have the money to buy one and even if I did, I most probably wouldn't ....

I reckon you would have a hard time moving it on therefore, from the 2 x options you have given us, fixed term would get my vote ....

If there was another investment choice, real estate would win hands down for me!!

[DJM]

Keep the house.  Will outperform fixed interest and cars over the long term.

Or buy the 964 to enjoy it and if you don't lose a heap, think yourself lucky.  I'd hate to buy a car as an investment (especially $650k!) and then shit myself every time I drove it.

[GUT]

A 964 turbo at $650k is not a good investment. Fixed term way better.

Property hands down.

If I bought a car for $650k, it'd be because I have more than enough property and other investments. I would never buy a car that I'm afraid to drive. The point of a car is to drive, full stop.

Maybe more to the point, any car I bought I would drive, otherwise I wouldn't buy it.

 

[MFX]

I agree with @bear924 that neither is a good place for your money. @DJM is on the money with property as a much better place to park your money. 

[hugh]

Where is @symsy ? Bitcoin? 

[TwoHeadsTas]

Remember no CGT on vehicles, but there is on properties other than own main residence, and normal tax is payable on interest earned.  Plus consider transaction costs - stamp duty on purchase of vehicle, stamp duty and legals on purchase of property and commission and legals on sale.  At least no transaction cost on money in the bank.  With only a little extra risk u can get double your 2.5% with a Vic based investment organisation rather than a bank.

However, with everything taken into account, and comparing after tax returns, it's all probably much of a muchness in the end........

[FAP911]

Think "Coastr" summed it up beautifully in 930 Values thread

Fun topic and thread drift.  

Cars are a fun hobby that you can navigate carefully to not spend a fortune on depreciation.  Way more fun than wine or art.  But they are not investments.  The fun bit is losing less than everyone else or occasionally having a win where you get a clear profit.  But it’s fundamentally a greater fool game and the population of fools will eventually exhaust.

The simple definition is : investments feed you, liabilities eat you.  A true investment provides cashflow and has a principal value that grows at least as fast as real inflation, or sometimes better. The number of cars in that bucket is astonishingly small and I doubt any 930s are in that bucket. 

You don’t have to pick winning stocks to do well.  Just buying the asx200 and reinvesting the dividends for the last ten years would have nearly doubled your money, and required no insurance, taxes, maintenance, and that is in a period where it tracked sideways for a long time.

•  

[poetry911]

FIXED TERM and in the mean time low ball low ball low ball

[ANF]

Bank deposit easily if it is the only other choice.

The car, stamp duty would be excessive as would insurance, therefore would most likely lose $ on the car, unless a boom came along....

How about 1/2 and half?

[Coastr]

Half a 964 turbo?  I’ll take the back half thanks

[ANF]

1 minute ago, Coastr said:

Half a 864 turbo?  I’ll take the back half thanks

HaHa, what's a 864??

A $300k car and the rest in bank....

[smit2100]

7 hours ago, bear924 said:

As someone who appreciates Porsches and does consider future values when purchasing, I would suggest you are comparing apples with oranges. In my mind:

Investment - The purchase of an income producing asset which has a value determined by the expected future cash flow of the investment.

Speculation - The purchase of a non income producing asset in the hope that a 'greater fool'* will purchase said asset at a higher price.

I may be purchasing a new Pcar speculation next week, however I am purchasing with the expectation that prices will soften in the not too distant future and that my primary purpose of purchasing is to enjoy the car. Therefore, I would only purchase the 964 if you wanted to own and enjoy a 964 and would be happy to sell it for less than your purchase price when finished. 

Therefore my vote is FIXED TERM ... even though, in reality, I feel there are better investments out there and would purchase neither as an investment.

* - My reference to 'greater fool' is referring to 'the greater fool theory' of investment, not suggesting anyone past, present or future person on this forum or any related Porsche activity is a fool. 

 Sound response above.  @ lucky phil, NEither and i am going to give you a headache.   How about you step it down a notch and do a hedge.  Take that coin and buy a 993 turbo and you will only be shit scared  half as much  to drive it compared to the 964 turbo, but   probably a better drive anyway.   With the 300 to 350k left over, dump it ALL in CSL Shares when the market has a pull back.  Put those up as security for a margin loan of 80% x 350k = 280k. at circa 5% on the same day  and dump that into CSL as well.   Then sit back for two years and enjoy the rides.   993 may go up but who gives a toss if it doesn't.  CSL odds of a decent return is pretty damn high and have an awesome track record of return on deployed capital and hence share price  that far exceeds property gains if you look at its share price over any journey since they went non government owned.   220 bucks a share in 18 months time ( assuming no share splits)  aint as silly as it sounds. What are the odds of that   964 going  for 800k plus in  two years time? MARGIN LOAN INTEREST is tax deductible and just  the ÇSL dividends tax effected  will probably beat your fixed interest of  circa  1.8% after you lodge a   tax return.  For those saying what about paying any  capital gains, thats a good thing isnt it. Plus is a pristine 964 turbo a incrementally better drive than a well maintained 993 turbo.

Fixed interest? Why let the bank profit on your cash.   May as well own the  bank and the  tax effected dividend far exceeds the fix interest after tax return ASSUMING  the share price  holds its own by circa 200% plus.

My nostradamus prediction is if  you did the above and sold out of everything in two years time, you could get a free carry on an imported 930 turbo or at least  996 turbo if you let symsy do the tyre kicking on your behalf.  

In terms of memoralising  and coming back to this post in two years time, CSL shares   today are at $170 so if you spent 600k that's 3500 shares  Your return on fixed interest will be less than 30k after tax for two years. (A free carry of 1.5 to 2 bargain  boxsters)

Multiply 3500 x csl share price in  2  years time  which you can offload in under a day or within 5 minutes if not too greedy plus two years of csl dividends, less  the loss on sale of the 993 turbo  at a  300k purchase price with stamps - 20K  margin loan interest  - 10k for keeping the 993 on the road (4000 kms of driving) and how that stacks up against the  30k fixed interest return vs   How that stacks up against  the  sale price for  a 12500km (100kms a month)  964turbo that will take you how long to dispose of - 650k - stamp duty on 650k  - 10k running costs.

 

 

 

[LeeM]

 

6 hours ago, bear924 said:

 however I am purchasing with the expectation that prices will soften in the not too distant future and that my primary purpose of purchasing is to enjoy the car. 

 This ^ ?

  I'm an uneducated idiot, and I buy stuff because I want it and it makes me happy (which is why I'll never be wealthy), yet to drop $650k on a car is akin to playing the stock market or going to the casino. Sure, it will be a helluva car and you'll be the envy of those who want one themselves, yet unless you're prepared to take a hit with a few grand or potentially a lot more in the future if and when the market for high end cars drops, and as boring as it may sound, I'd be buying something a lot cheaper and maybe a holiday house to clean up that is nearly guaranteed to appreciate in value (if you haven't got one already). You buy what you want and can afford that makes you happy, as you never know what the future holds in that you could be dead tomorrow. Mortality aside, that is some serious coin for a car, and even for me as a financial muppet, I think it's too risky as an investment for the future.

[Pork Chops]

7 hours ago, FAP911 said:

But it’s fundamentally a greater fool game and the population of fools will eventually exhaust.

•  

This is essentially the property investment game. Rental yields are stupidly low so no point in buying an investment property for that reason. So it must be for capital gain. But if rents are static and prices go up you’re hoping to sell to someone who will take a lower rent yield than you. I.e. a bigger fool. IMHO a major factor in house price inflation is the availability of debt. Wait until the banking royal commission is over the see what rules about lending practices are handed down to the asshole banks. When you can only lend 4 times income instead of 8, what’s going to happen to house prices?

That said the last 20 years in property has made a fool of me but I’d be cautious ATM...

[hugh]

Save yourself a couple of 100k and grab that 996 GT3 RS instead 

[JLD]

I think that the only person that will make money short term on that 964 Turbo is Duttons. Your fixed term on $650k will give you $682k in 2 years, the 964 will cost you 2 years registration, 2 years servicing, 2 years for something to go wrong and require potential costs and then you’d need to find a $700k buyer to beat the $682k. Too much risk imho

[firstone]

You could ask one of the big four investment advisor's. ?

[Rod C]

Buy in gloom and sell in boom! I think the indicators are closer to gloom than boom if the current national debt is anything to go by.

[micknine01]

 invest in P cars, but I wouldn't put all my eggs into that 964 basket. 

1x 993 TT 

1x 996 GT3 

1x SC

1x 3.2

Much more exciting than watching your fixed term tick over ?

 

 

[symsy]

Diversity , varied price points to liquidate from , 50, 80 100 sub 150k cars complete not projects offer good returns 10-20  percent , I think the Porsche market a tad flat , but still I’m in for 5 cars and 3 in other areas, others just like Porsche are being hit . I had cars with 40 points in them and liquidated at break even 2 yrs later , I guess you call that s loss !! 

Banks returns ain’t a return .. 

I wouldn’t buy a 500ker anywhere .. unless it was a super classic , definitely not a 964 Turbo 

Just tyre kicked a little sydney ... not much inspirational stuff out there 

maybe  I should start a a car hedge fund ? I do still think there are opportunities out there .

trading from behind a desk don’t cut it .. though you gotta get out there in the mix 

enjoy driving your investment whilst you make 2.5 percent tax free is a no brainer .. go buy cars   , even if you didn’t make the 2.5 , it wouldn’t change your life , having those experiences and drives will ?