By Eric Peters, Automotive Columnist
Stocks and 401ks are about as reliable (and worth about as much) as Confederate dollars. So, where to put your extra cash — assuming you have some?
Consider buying an antique or classic car.
If that sounds like an indulgence — a purely discretionary splurge on something that has no real usefulness — well, you’re partially right. But a classic car is also something else: It’s a way to convert your slowly deflating dollars, whose purchasing power declines with each cycle of the Federal Reserve’s printing presses, into a durable asset — much like gold.
Don’t forget: People buy gold because it is a “value stabilizer” that at least partially immunizes the buying power represented by the dollars used to purchase it against the inevitable decline in value of those paper dollars. Gold can perform this function because unlike paper currency, there is a limited supply of it; it’s not possible for a central bank to just flip a switch and flood the economy with newly minted gold. In contrast, those “Federal Reserve Notes” you have in your pocket have absolutely no intrinsic value whatsoever — beyond their capacity to provide you with kindling to start a fire or maybe help in the bathroom.
Just like the 1920s German Mark.
If the Federal Reserve decides to double the supply of dollars next year, all it has to do is turn on the printing presses. But the buying power of the dollars in circulation does not increase. In fact, it is decreased by exactly the amount of new money printed.
You now need $20 to buy what $10 used to buy.
Until this past fall, people invested in stocks and so on as a way to hedge against the constantly declining value of their paper dollars. Now that option’s looking not so good — which is why people are flocking to things like Gold.
Which brings us back to classic cars.
Think about it. A classic car — something like a ’65 Corvette – is a lot like gold, only better because you can’t drive gold or do burnouts with it. Also, unlike paper dollars, they’re not making anymore ’65 Corvettes. There is a fixed and limited supply — which in a very important way makes a classic car inflation-proof.
The market value of a classic car may go up or down, but it is extremely unlikely that it will ever lose 30-40 percent of its worth — let alone become worthless — like the value of your 401k.
In fact, the trend is consistently, reliably upward. A ’65 Corvette — or any other legitimate collectible car — will never be worth nothing, or next to nothing, unless the entire economy collapses. And even then, you will still have an automobile. A functional piece of machinery that could be used for something.
At the very least/worst case scenario, you have the scrap value of its metal and so on. And let’s face it, if it gets to that point, none of this matters anyhow.
Meanwhile, assuming we’re not facing the Economic End Times, buying a classic car is a fantastic way to protect your assets and have fun doing it.
Plus, like buying real estate, right now is a great time to buy a classic car — if you have some cash available.
It’s not so much that the prices of collectible vehicles have dropped to the extent that home prices have. (They haven’t.) It’s that it’s generally harder to buy a classic car unless you have a pretty large wad of cash and/or excellent credit sufficient to get a loan.
This is advantageous to the relative handful in a position to buy — the proverbial buyer’s market, as with real estate.
Keep in mind, however, that there are fewer financing options on cars over 20 years old. Lenders tend to be more persnickety — and often demand as much as 20 percent down in cash. Even if they don’t, the interest payments on a classic car loan can be killer — 10-15 percent or more vs. the current 0 down deals on brand-new cars. And the loan terms are usually shorter — three years being typical. That means the monthly nut will be higher. On a $30,000 purchase, the payment might be $600 per month.
That weeds out a lot of folks.
But if you do have cash, there are few investment in this economy that are more blue chip. You’ll be protected against inflation — something the money in your bank account (or under your mattress) is completely vulnerable to.
Let’s say you take $25k out of your savings to buy a classic car. Next year, courtesy of inflation, the price of the car you bought balloons to $35k. Had you left the money in the bank, you’d be $10k poorer, in terms of purchasing power. But instead, your money’s value is maintained because you converted it into something of enduring worth that isn’t vulnerable (or as vulnerable) to the manipulations of the Federal Reserve, Wall Street and Congress.
There’s another benefit, too.
If you ever need to “cash out,” there is no penalty for early withdrawal, no onerous, obnoxious paperwork — and no punitive taxation. Indeed, you can convert the value of your classic car into cash money at any time — and keep every penny. No income tax — unlike wages you get from your job or “returns” from traditional “investments” in things like stocks and interest payments, etc.
For the moment, the federal government hasn’t thought to close this little “loophole” (Orwellian Language Alert).
So, not only can you insulate yourself against the ravages of inflation and a shaky dollar, you can access your cash at virtually any time, without filling out reams of paperwork or being forced to pay a confiscatory tax to Uncle Shyster. Think of it as a full-size, fully mobile piggy bank.
What could be better?
Or at least, give you the best excuse yet to buy that classic car you’ve always wanted?
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