Saturday, July 10, 2010

The BP disaster will not kill the Classic Car scene

The other day I read a newspaper article arguing that with the BP disaster in the south of the USA oil prices would increase as the approach to get the oil deep down from the sea wouldn't be anymore allowed because of the risks involved. Let's assume this is true for a moment. And let's assume the price for gasoline would go up by 100% due to this over the next two to three years. For purely selfish reasons I asked myself what the impact on the vintage and oldtimer car scene might be. Would this kill our cherished hobby? Would this decrease the value of the many car collections? Honestly I doubt and I did some simple calculations.
When you own a classic car from the 60ies for example, you spend probably money for a number of things, i.e. insurance, garage/place to leave the car when you don't use it, maintenance and repairs and yes, for gasoline. If you drive your car for 1'000 kms per year, then gasoline is probably 6-10% of your budget, if you go to 3000 km - and few do more than this - then you may end up with 16-25% of your budget for gasoline. If we now double the price of fuel, then of course these percentages go up too. And the total cost will increase by 11%, respectively 26%. On an absolute level this is not that much, especially compared with the total value of your investment. And, you can compensate the extra cost by driving a bit less, i.e. 2'000 km instead of 3'000 km. So if you really love your car, doubling the price of gasoline will not change this and you will be able to deal with it. Even tripling the price of oil will not make you changing your mind. Good! If this calculation is correct then we are save and prices for classic cars will not plunge. The issue though may be that not all owners of classic cars really do it for passion and we may observe some price drops when they get rid of their now more expensive hobby. But this will not make the hard core of the classic car scene tumble. I hope.

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