Thursday January 2, 2014
There have been some quite incredible stories in the news of late concerning the seemingly enormous returns that some investors are taking away from classic car buying. It’s been interesting to see, also, new money move into the classics market and the sort of cars that investors are picking up. If you’re thinking of entering the market, even if you have no plans to get anywhere close to the mileage limit on your classic car insurance, you should beware of five common misconceptions about classic cars...
Investing in Classic Cars is Low Risk
Sure, there’s an advantage to buying physical, usable goods over intangible assets, but that doesn’t mean that investing money in classics is necessarily low risk. Some cars are safer bets than others, but the headline returns come from those who buy a classic some years before it really becomes popular. Classic car investing can be low risk, but there’s never any guarantee of your classic being popular in ten years’ time.
Classics are Easy to Sell
If you’re used to a broker making quick trades on your assets, you should know that the classic car world is certainly not like that! It can take months or even years to find the right buyer for a particular classic; that’s if you can find a buyer at all! For this reason, you might have to be prepared to hang on to a classic for some time.
Classics have No Running Costs
Even with a SORN notice, your classic won’t just sit in the garage patiently until you are ready to sell it on. A classic is a machine that needs to be looked after, run every so often and correctly stored during colder and wetter periods. Rust or a locked up engine are two of the biggest and most expensive problems that come from classics that have gone unused.
You Don’t Pay Tax on Classic Car Sales
While some classics are exempt from capital gains tax, you shouldn’t assume that this applies to you. In fact, if you’re trading in classic cars as an investment, what you most probably have is a classic car business. While you still avoid capital gains, you suddenly become liable for corporation tax. Seek advice before you invest.
High Returns on Classics are Here to Stay
There’s a lot of speculation around at the moment about the likelihood of a shift from intangible assets to tangible assets, but there aren’t really any indications to tell us that this is a permanent shift yet. The economic conditions of the last three or four years have been something of a special case and, as such, it’s much to early to speculate on these sort of subjects.
While there is most certainly money to be made on classics at the moment, there’s never any guarantee of good returns. If you’re thinking of investing in classics, you should speak to a financial advisor before splashing out.