Classic cars as an alternative investment

Over the past few years, classic cars as an asset class has remained firmly at the top of the Knight Frank Luxury Investment Index, increasing in value by 288 per cent and out-performing other alternative investments such as wine, art, coins, and jewellery.

Whilst growth has slowed slightly recently, experts say that financial figures can be misleading, explaining that the slowdown could be “a symptom of the incredible, and ultimately unsustainable, growth we witnessed in the early 2010’s.”

For example, in 2011 a MK1 Jaguar E-Type would have cost around £30,000. Now it would cost anywhere between £100,000 to £200,000.

However, sales figures show that there is still a healthy appetite for classic cars. Amongst the less expensive models, such as the Fiat 500’s of the 1960’s and 1970’s, sales remain high. As do sales of some of the pricier vehicles.

In 2017 alone, 123 classic cars were sold for over $5 million each. And just last week an Aston Martin was sold by Bonham’s at the Goodwood Festival of Speed for over £10 million, making the ‘2 VEV’ the most valuable British car ever sold under the hammer in Europe.

These are all clear indicators that the market for this asset class is alive and well.

“Classic cars, with their iconic styling and cultural reminders, are still hugely desirable for enthusiasts and car lovers alike,” says Marco Abele, CEO, and founder of TEND Swiss. “Prices have continued to be strong, despite price growth slowing last year.”

He adds that many people look to invest in classic cars because of their “passion for them” and their “wish to enrich their lives with the investment and its related experiences.”

What’s more, from May 2018, the Government has agreed to exempt most vehicles made before 1978 from compulsory MOT testing.

The thinking behind the decision, according to the Department for Transport (DfT), is that these cars are “usually maintained in good condition and used on few occasions”.

The change broadens a current exemption for those bought before 1960 and will increase the number of older vehicles legally without an MOT on the road from just below 200,000 to almost 500,000 – about 1.5 per cent of the UK total fleet.

The DfT is introducing the change because the modern MOT does not adequately check historic cars.

Dismissing concerns that classic cars pose a greater risk of failure than modern ones, the DfT says: “We consider the element of risk arising from taking vehicles over 40 years old out of the testing regime is small. The option for owners to submit their vehicles to a voluntary MOT test will remain and they will still, like all vehicle owners, need to ensure that they meet the legal requirement of keeping their vehicle in a roadworthy condition at all time.”

Click here for more information about how to declare a vehicle for the 40 year MOT exemption.

It is also worth noting that classic cars are normally exempt from Capital Gains Tax, unless bought and sold with business intentions.

Beavis Morgan – Advisers to high-net-worth individuals and UK investors

Our team at Beavis Morgan has been instrumental in helping clients maintain their capital value and manage their income levels, to assist in continuing to meet their lifestyle goals.

We proactively explore the intricacies of the tax legislation, making sure that all reliefs available to you are utilised and that your interests are safeguarded. We can also assist you with medium and longer-term financial planning to ensure that you, your family, and ultimately future generations of your family, will benefit from your wealth in accordance with your wishes.

For more information and to discuss your tax affairs in further detail, please contact you usual Beavis Morgan Partner.