Are you thinking about buying a classic car? Perhaps you dream of driving a vintage vehicle? Whether as a hobby or to make some money, many people own or invest in classic cars. Let’s look at what you need to consider when purchasing a classic motorcar.
- Are you an enthusiast or an investor?
You might be someone who has always dreamt of owning a classic car. The definition of a ‘classic car’ is one that is usually 25 years or older. The Porsche 911, for example, has been around since the 60s but 90s models are highly sought after. You might aspire to own a vintage Aston Martin but with a future resale price in mind. Owning or investing into a car have different purposes, so make sure you’re clear on your reasons and you understand the market for your model. - Choose the right vehicle
There are pros and cons for buying a classic car. Rare, limited or special edition vehicles that are no longer in distribution are usually more valuable. However, that could mean that it’s difficult to purchase spare parts. As markets change, and trends come and go, there’s no certainty that a rare car will hold its expected value over time. You will also need spare funds available to help you maintain the vehicle. - Classic cars can be a valuable asset
Whether your life goal is to own a classic car for pure enjoyment or as an investment, it is a valuable asset. However, like any other vehicle, mileage can soon rack up causing the car to depreciate. If you want your vintage motorcar as a weekend runaround, you may need to watch the mileage if you plan to sell it for a profit. But if you are a motoring fanatic with mechanical skills, you might be able to keep maintenance costs down. - Careful maintenance is required
Many high-value or vintage vehicles require air-conditioned garages and special maintenance, so you will need to factor in these costs. This is especially important if the vehicle is an investment as you will need to ensure it holds its market value. You might only want to fulfil a lifelong ambition to own a classic car for weekend drives. Even if you enjoy tinkering with less costly motor classics like an MGB Roadster, always factor in annual maintenance costs. - Increases to your estate value
As a classic car is considered a valuable asset, it will be taken into consideration when your estate is being valued. You may need to get financial planning advice to look at how you can mitigate inheritance tax liabilities. The current tax-free threshold including property is £325,000 (£500,000 if you leave your home to your children or grandchildren). So, if your classic car is worth £75,000, it would form a sizeable part of your estate and could take you over this tax threshold. - No Capital Gains Tax on resale
Interestingly, classic cars are classed as ‘wasting assets’, which means you won’t have to pay Capital Gains Tax on profits. So, if you have chosen the right type of vehicle and it appreciates in value, you won’t have to pay tax. However, you would be charged income tax if you decide to run a business buying and selling classic cars.
Classic car investing
As we’ve mentioned above, not all classic cars increase in value. So, you’ll need carry out detailed research if you are interested in classic car investing. Usually, the rarer the car the more valuable they become. But like any other market, investments can go up and down.
If you are unsure that the car you would like to buy will generate a return on investment, then you might need to think again. However, if the car purchase is more of a ‘passion project’ and you have the cash, then consider this a life goal achieved.
Wealth Management, Nottingham and Lincoln
Balance: Wealth Planning has many clients who enjoy buying or investing in classic cars. As our financial planning service is holistic, we can incorporate various factors and types of investment. So, if your dream is to buy a vintage Aston Martin, we can help!
Our team work closely with our clients to understand their needs, aims and aspirations. When we have a clear picture view of your current financial situation, we can produce a realistic financial plan to help you achieve your goal.
For a financial review, get in touch to speak to our financial planning team.
Sources:
https://theprogenygroup.com/blog/investing-in-a-lifestyle-classic-cars/
https://jbrcapital.com/buyer-guides/how-to-buy-classic-car/
https://www.gov.uk/inheritance-tax
