Luxury car as investment - November 06, 2016

Luxury car as investment

The superrich are investing in luxury items but one part of the sector is growing faster than the others: cars. As Bain & Company found out, luxury car sales will grow 8% this year, outpacing all other items. CNN Money wrote about the trend, predicting “that sales in the overall global luxury market will reach €1.1 trillion ($1.2 trillion) this year, and 40% of that spending will be lavished on fancy cars”.

They also mentioned that a lot of this spending would go on “regular” luxury cars like Mercedes, Audi, BMW but the biggest growth – 20% plus – would probably be registered by brands like Rolls Royce, Ferrari and Lamborghini.

The research also discovered another interesting thing: which parts of the world are buying most of these cars. According to the consulting firm, Gulf states, Russia, Indonesia and China are the biggest buyers. They buy the same things, but their motivations are a bit different, it turns out. For example, citizens of the Gulf states buy luxury cars for using them abroad too, at their second homes.

China’s involvement on the list is not surprising as they produce billionaires faster than any other country, as we wrote about it just a week ago.

Russians on the other hand buy these cars with investing in mind as well. As CNN Money wrote: “The weak ruble is making goods in Russia relatively cheaper for buyers who have most of their wealth stashed in dollars or other foreign currencies. On top of that, some Russians have used luxury car purchases as a way to store and preserve their wealth as the ruble plummeted.”

We wrote about the problems of the Russian economy and ruble beforehand, concluding: „it seems that keeping our money in western currencies instead of rouble or tenge (or other oil-dependent country’s currency) can help us not only to protect the value of our investments, but even to reach some profit thanks to the capital gains”.

Choosing our investment, we should also pay attention to liquidity. For example, real estate has several strengths, but altogether needs constant care and it has low liquidity. The same can be said about luxury cars: it’s not always easy to sell them fast and with a profit.

Disclaimer: This analysis is for general information and is not a recommendation to sell or buy any instrument. Since every investment holds some risk, our main business policy is based on diversification to minimize threats and maximize profits. Innovative Securities’ Profit Max has a diversified portfolio, which contains liquid instruments. This way, our clients can maintain liquidity, while achieving high returns on their investments.