The age old problem of depreciation

• Cars depreciate in value…it is a relative certainty that is demonstrated by the residual value of 90%+ of cars on the road today.

• In the majority of cases, depreciation is highest over the first few years of a cars life before slowing to a more gradual rate as any new car premium is eroded and the vehicle’s on the road value converges with its usable value and ultimately it’s scrap value.

• There are however, a minority of cases where depreciation is only half the story…

It’s lesser known antonym, appreciation

• In an number of examples, you will see depreciation hit an inflection point from which the value of the car can begin to appreciate.

• Whilst the time taken to hit this inflection point can vary dramatically between individual makes and models,  there are a number of traits a car can exhibit which helps foster its appreciation in value…

The CC Investment Principles
What makes a car appreciate in value?

1. Rarity - Less is more …the fewer number of units produced, the scarcer they are and the more desirable they become.

2. Manufacturer - The power of the badge …marques coloured in deep motorsport ancestry such as Ferrari, McLaren and Porsche tend to have a larger cult following than the more generic names such as Vauxhall, Citroen and VW. Simply put, supercars are more interesting than MPVs.

3. Engine capacity - No replacement for displacement …as new emission regulations become increasingly restrictive, larger capacity naturally aspirated engines are being replaced with smaller, more efficient forced induction engines. V10s and V12s are soon to be confined to the history books.

4. Gearbox - 3 pedals are better than 2 …any purist will always gravitate to a manual gearbox over an automatic one. This is not a function of performance but because it provides a more intimate and visceral driving experience.

5. Chassis - Through the bends …again bowing to the purist’s vices, a car that does not handle well, regardless of how fast it is, is destined to fail the test of time.

6. Design - Beauty is in the eye of the beholder …the way a car looks visually is a huge part of its character. Whether it is considered beautiful is less significant. Eye catching, innovative, ground breaking and memorable are more important.