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What About Investing in a Classic Car?

If you have a bit of money you would normally put into a savings account, you will probably already know that the rates are so low that it is barely worth putting it away.

Interest rates have touched an all-time low of around 0.5%, and they have been there for some time. This is good news if you are borrowing, because loans and mortgages are cheaper, but it is pretty bad news if you are trying to make your savings grow. Likewise, buying shares has been a bit hit and miss, with the major markets taking a hammering since the financial crisis in 2008. Property is recovering, but that requires a far heftier investment, and the situation is still patchy in terms of increasing values.
Against that background, it is no wonder that many investors are turning to alternatives, and the one that is giving the best returns at the moment is the classic-car market. A recent survey showed that the average price of a classic car had risen by 487% in the last ten years, with art in second place some way back with a 252% rise. These astonishing increase may be due to a number of factors, with analysts saying that a rising level of wealth in the developing nations is creating more demand. Another reason is the deregulation of the pensions market, which allowed savers to include more exotic assets, such as classic cars, in their pension pots. But perhaps the strongest reason for people investing in classic cars is that capital gains tax does not have to be paid on the rise in value of such assets when it comes time to sell, unlike other more traditional investments. 
At the top end, the rises can be huge and the price tags are eye-watering. For example, in 2014 a new record was set for the price of a classic car when a Ferrari GTO 250 from 1962 sold for £24 million. According to the auctioneers, however, the picture has recently changed, and more modestly priced cars are actually doing better in percentage-rise terms. For example, the biggest riser was the Fiat Dino 2000 Spider, which rose by 45% from £45,000 up to £65,000. In contrast, an old favourite at the top end of the market, the Mercedes 300SL Gullwing, was unchanged at around £1 million. 
Some reasonably priced cars are also beginning to make it into classic territory and are enjoying steep price rises. These include the Mark I VW Golf GTI, which has risen in price from £7,900 to £10,500 - an increase of around 33% in just the last year. In fact, according to the auctioneer’s survey, the vast majority of big risers in the classic-car market have price tags under £100,000. 
Other cars that are beginning to attract the classic-car collector and investor are the MK I Ford Cortina, which is now changing hands for just under £5,000. The Ford Escort RS 2000 MK II is going for around £7,600. Early Land Rovers are still available for under £10,000, as are the first examples of the two-door Range Rover. Both look like good investments, as auction guides are predicting strong price increases soon. 
A word of warning, however. It should be remembered that prices of classic cars can go down as well as up, and any investment should be looked upon as a speculative one. This is especially true of classic cars, because there are so many variables. Cars do come in and out of fashion, and if you buy at the wrong time you could be the victim of a shift in taste. The condition of the car is also vital, and it is not an exact science. Every effort should be made at time of purchase to ensure that the car is in good condition and structurally and mechanically sound. It should also be as original as possible.

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Back to July 2015

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