Investing in Classic Cars

[Extra 300 Driver]

Just entertain me for a while,

I am looking for where to make investments, about £300k. I have been looking at VCT and Structured Products but my heart isn’t really in them, and the returns seem to be a little low, and the risk quite high (you could lose your initial investment in some cases).

So I have come up with a plan to start a company which invests in classic cars, and motor cycles – holding and maintaining them for 10 years or so – and hopefully gaining an increase in value. It would also motivate me as I obviously have an interest in cars and I could decide where to invest the cash. Now I know that there will be a lot of tax and costs, and whilst you might say that it’s not the smartest investment, but I feel there is a lot to be said for actually having an asset in your possession.
Any thoughts? Totally stupid, or not smart, but not totally stupid!?

[trickywoo]

Extra 300 Driver said:

but I feel there is a lot to be said for actually having an asset

Not if it's part of a missive bubble.

When people start thinking like you are it's a good indication we are near the top.

[Extra 300 Driver]

trickywoo said:

Not if it's part of a missive bubble.

When people start thinking like you are it's a good indication we are near the top.

I see your point

[jeff m2]

Are you sure you could sell them
You could become a classic car hoarder, I know I would.

[NRS]

Extra 300 Driver said:

trickywoo said:

Not if it's part of a missive bubble.

When people start thinking like you are it's a good indication we are near the top.

I see your point

It could easily still rise from here, but the downside is most likely a lot larger than the upside. Prices have already gone up a huge amount, and now interest rates are starting to rise in the US. That will likely result in money moving out of assets elsewhere. So I would not do it with my money.

[sunbeam alpine]

I've been doing this for the last few years (just privately, not as a company), but at a much lower level. I buy classic cars up to about €12000 each - mostly Italian (Alfa/Lancia) - but I'll buy anything which tickles my interest.

My primary motivation is not to make money, more that keeping savings in the bank is pointless, and I know nothing about shares etc.

I use all my cars regularly, so I get enjoyment out of them, and I'm happy with the "return" that I'm getting. I've recently had my cars professionally valued and I've slightly more than quadrupled my original investment.

The other side of the equation is that I pay tax/insurance etc. on all the cars so my real "return" is lower (but I have a lot of fun).

I also accept that the professional valuation is on the high side, and maybe not attainable, although at a recent classic car show I attended, the prices for comaparable models were even higher.

[drainbrain]

sunbeam alpine said:

I've been doing this for the last few years (just privately, not as a company), but at a much lower level. I buy classic cars up to about €12000 each - mostly Italian (Alfa/Lancia) - but I'll buy anything which tickles my interest.

My primary motivation is not to make money, more that keeping savings in the bank is pointless, and I know nothing about shares etc.

I use all my cars regularly, so I get enjoyment out of them, and I'm happy with the "return" that I'm getting. I've recently had my cars professionally valued and I've slightly more than quadrupled my original investment.

The other side of the equation is that I pay tax/insurance etc. on all the cars so my real "return" is lower (but I have a lot of fun).

I also accept that the professional valuation is on the high side, and maybe not attainable, although at a recent classic car show I attended, the prices for comaparable models were even higher.

Sounds like you've got a bit of a talent for this 'hobby'. Why don't you get into it more seriously? More people should make a living from what they enjoy, and you certainly don't sound like you'd have any difficulty. Well done!

[red_slr]

Its not been difficult, a lot, if not most classic cars have gone up 2-3 times in value in the last 10 years.

However, some things to consider for *long term* investment classics.

Inflation. This will make a massive dent in your profits in the long term.

Insurance. Wont be cheap, esp on £300ks worth. I would expect insurance costs be be IRO 1-2%.

Service costs. Exotics can cost a fortune, but 1 x 300k car vs 10 x 30k cars... costs may well not be that far between so I would plan that budget from day one, its money you will never get back in the grand scheme of things. Could be talking tens of thousands PA.

The big one... mechanical failures. Lets say you get a £10k bill, not that unheard of on a £30k classic for example. Well that's going to hurt. Its 33% of the value of the car.

Tax. If you are running it as a company (why would you?) then tax might be an issue. If you are selling cars as a car dealer then you MUST understand the rules and you can not deduct costs from your profits. You will also need to pay VAT on the profit. It gets complicated and you will need very good record keeping.

I think you have the right idea. However I would look to do it as a hobby and flip cars fairly quickly. I would certainly not be setting up a company. I think 2 or 3 good cars which are in demand buy in the winter and sell in the early summer. Keep costs very low, keeping <12 months will mean little to no service costs. Buying when demand is lower and selling when demand is at the peak.

That's what I would do.

[DonkeyApple]

Storage. Buy the commercial unit in the most tax efficient manner and make it yield through storing other people's car collections. As the market expands the need for storage becomes greater and if the market crashes then the banks will need storage for their seizures as will the insurance and legal industry for storing the disputed assets.

I'd rather run a solid and yielding asset that can be adapted to market conditions than take a massive speculative punt but I'm a shovel vendor by nature, not a hole digger.

[trickywoo]

DonkeyApple said:

Storage. Buy the commercial unit in the most tax efficient manner and make it yield through storing other people's car collections. As the market expands the need for storage becomes greater and if the market crashes then the banks will need storage for their seizures as will the insurance and legal industry for storing the disputed assets.

I'd rather run a solid and yielding asset that can be adapted to market conditions than take a massive speculative punt but I'm a shovel vendor by nature, not a hole digger.

I've just finished reading a book on the original Klondike gold rush and while some of the miners made fortunes many didn't and of those that did few managed to hang on to or do anything worthwhile with it. The people supplying the stores and immediate means of spending the new found wealth however, did very well.

[red_slr]

trickywoo said:

DonkeyApple said:

Storage. Buy the commercial unit in the most tax efficient manner and make it yield through storing other people's car collections. As the market expands the need for storage becomes greater and if the market crashes then the banks will need storage for their seizures as will the insurance and legal industry for storing the disputed assets.

I'd rather run a solid and yielding asset that can be adapted to market conditions than take a massive speculative punt but I'm a shovel vendor by nature, not a hole digger.

I've just finished reading a book on the original Klondike gold rush and while some of the miners made fortunes many didn't and of those that did few managed to hang on to or do anything worthwhile with it. The people supplying the stores and immediate means of spending the new found wealth however, did very well.

Its interesting stuff isn't it. I heard only a couple of hundred people actually made a profit from the gold itself. A few tens of people actually got rich from it. The rest returned home broke or in a box. Even wealthy people. The cost to get up there was so expensive it was just not worth it.

[DonkeyApple]

swerni said:

DonkeyApple said:

Storage. Buy the commercial unit in the most tax efficient manner and make it yield through storing other people's car collections. As the market expands the need for storage becomes greater and if the market crashes then the banks will need storage for their seizures as will the insurance and legal industry for storing the disputed assets.

I'd rather run a solid and yielding asset that can be adapted to market conditions than take a massive speculative punt but I'm a shovel vendor by nature, not a hole digger.

Maybe call is garaged.com


What could possible go wrong.

The thing is that it is just a cheap building unit on land that is utilised for storage. I very much suspect that storage is the industry to be in for the foreseeable future, whether it's the storage of pensioners, waste, goods, assets, cars we have a growing population that cannot stop consuming and a land & property cost that means many cannot afford to self store.

Depending on which part of the UK you live in there will be a particular storage problem to be monetised. And of the two bubbles to invest £300k in I'd prefer land over cars as the latter has no necessity value, no true yield potential, no regulation, no flexibility of use, isn't a true asset class, is riddled with fakes and frauds etc.

Despite what the media claims about cars being an asset class they are really just a bit of fun and leisure and any investment is really just speculation and suitable for only a fraction of someone's total wealth. When times get hard for that market the speculators will quickly be reminded of all of this as all support disappears from the market whereas at least with land there will still be support from the financial markets in some form and the ability to quickly move from the storage of a now depreciating asset to a different asset or a different use altogether.

Private collection storage is a good opportunity in London. Very many of the UK owners of large collections live in central London and while some enjoy a spot of country life so keep their collections in storage out in places like the Cotswolds on their estates, more than enough do not and what they do is buy industrial units and convert them for storage. They like the units to be close to where they live and this tends to be along the A4 for the K&C lot and around here in Hampstead the industrial units around Cricklewood are perfect.

For every extremely wealthy car collection owner in London they are surrounded by far more modest collections but those people still have the same problem which is the inability to store their cars all in one location that is close enough to where they live to be able to go and see them or take friends to show them to.

Personally I think the storage industry is a genuine growth sector and that the area that is not being catered for properly as of yet is the space between ultra secure storage (safety deposit) and generic household or business stock storage. Maybe in that middle ground the cost of facilitating multiple clients in a secure and flexible environment plus the cost of purchase doesn't combine to make specific business case but I would prefer to actually invest in a flexible service product asset backed by tangible land and property than speculate on the totally bent and artificial asset class that is cars. The latter is just for fun and pleasure with capital growth just being a boon but an awful lot of people have lost sight of this and have been exposing a very disproportionate % of their wealth to a very dubious punt that in the ferver of the last few years of the boom has seen people far too over excitedly referring to the market as an investment class.

[DonkeyApple]

trickywoo said:

I've just finished reading a book on the original Klondike gold rush and while some of the miners made fortunes many didn't and of those that did few managed to hang on to or do anything worthwhile with it. The people supplying the stores and immediate means of spending the new found wealth however, did very well.

My degree included an element of geology and when I went into broking I began as a mining and exploration analyst where you quickly saw that you'd invest in supply and service companies in the sector but speculate on hole digging ones. The Klondike is a fantastic bit of history as it highlights the huge economic disparity and the predominant human affliction of greed exceeding risk awareness all packaged in an exciting and readable bit of history.

We are all different and so drawn more towards investment or speculation than others naturally but the excitement of getting rich quick always skews the numbers massively towards speculation. Hence the wonder of asset bubbles.

[NRS]

DonkeyApple said:

Personally I think the storage industry is a genuine growth sector and that the area that is not being catered for properly as of yet is the space between ultra secure storage (safety deposit) and generic household or business stock storage. Maybe in that middle ground the cost of facilitating multiple clients in a secure and flexible environment plus the cost of purchase doesn't combine to make specific business case but I would prefer to actually invest in a flexible service product asset backed by tangible land and property than speculate on the totally bent and artificial asset class that is cars. The latter is just for fun and pleasure with capital growth just being a boon but an awful lot of people have lost sight of this and have been exposing a very disproportionate % of their wealth to a very dubious punt that in the ferver of the last few years of the boom has seen people far too over excitedly referring to the market as an investment class.

Obviously cars are very much boom and bust with some quiet periods inbetween. However why would you say they're not an investment class when in many ways companies on the stock exchange could be called similar? In theory your company that you invest in has a real value due to generating profits etc. However a lot of companies are very hyped these days and you see lots of companies being bought at prices that likely will not see a return on the purchase price. Effectively they should/will go pop at some point too - and so similar to cars then the value wasn't "real". So why would you call one an investment and another not, despite the similar result?

[jeff m2]

NRS said:

DonkeyApple said:

Personally I think the storage industry is a genuine growth sector and that the area that is not being catered for properly as of yet is the space between ultra secure storage (safety deposit) and generic household or business stock storage. Maybe in that middle ground the cost of facilitating multiple clients in a secure and flexible environment plus the cost of purchase doesn't combine to make specific business case but I would prefer to actually invest in a flexible service product asset backed by tangible land and property than speculate on the totally bent and artificial asset class that is cars. The latter is just for fun and pleasure with capital growth just being a boon but an awful lot of people have lost sight of this and have been exposing a very disproportionate % of their wealth to a very dubious punt that in the ferver of the last few years of the boom has seen people far too over excitedly referring to the market as an investment class.

Obviously cars are very much boom and bust with some quiet periods inbetween. However why would you say they're not an investment class when in many ways companies on the stock exchange could be called similar? In theory your company that you invest in has a real value due to generating profits etc. However a lot of companies are very hyped these days and you see lots of companies being bought at prices that likely will not see a return on the purchase price. Effectively they should/will go pop at some point too - and so similar to cars then the value wasn't "real". So why would you call one an investment and another not, despite the similar result?

We are going a tad off topic, but the storage industry (the shovel not the gold) is a sound proposition. Public Storage (PSA NYSE) has proved to be a sound business plan. It does not consider cars to be it's bread & butter but it does accommodate them. There are companies that specialise in cars and charge about 50% more but are climate controlled with battery tender facilities. (around $200/Month)
P.S. target is household storage, it also has large large contractor customer base.
Quite a few have successfully copied the P.S. operation.

[NRS]

jeff m2 said:

We are going a tad off topic, but the storage industry (the shovel not the gold) is a sound proposition. Public Storage (PSA NYSE) has proved to be a sound business plan. It does not consider cars to be it's bread & butter but it does accommodate them. There are companies that specialise in cars and charge about 50% more but are climate controlled with battery tender facilities. (around $200/Month)
P.S. target is household storage, it also has large large contractor customer base.
Quite a few have successfully copied the P.S. operation.

It wasn't a question on which is best etc. - just what is the reason for saying cars are not investments when people are investing in companies whose earnings are far below their value and likely future value - and so in that sense those investments are perhaps different from assuming a company's earnings will grow your investment which might be used to separate them in the past.

[jeff m2]

NRS said:

jeff m2 said:

We are going a tad off topic, but the storage industry (the shovel not the gold) is a sound proposition. Public Storage (PSA NYSE) has proved to be a sound business plan. It does not consider cars to be it's bread & butter but it does accommodate them. There are companies that specialise in cars and charge about 50% more but are climate controlled with battery tender facilities. (around $200/Month)
P.S. target is household storage, it also has large large contractor customer base.
Quite a few have successfully copied the P.S. operation.

It wasn't a question on which is best etc. - just what is the reason for saying cars are not investments when people are investing in companies whose earnings are far below their value and likely future value - and so in that sense those investments are perhaps different from assuming a company's earnings will grow your investment which might be used to separate them in the past.

Agree, but as a possible combination business it could make sense.
A facility for collectable cars.....where you could also store your own.

[Mark8303]

Agree regarding storage, I bought shares in Tritax Big Box last year and whilst they haven't 'flown' yesterday, I am confident they will over the long term. Out of town storage and distribution centres are the future;)

[FredClogs]

Buying, restoring, marketing then selling cars are 4 different jobs. I very much doubt you'd be adequate at all 4 on top of managing the business. Invest the money I tax efficient ways in standard ways, or buy a house or 2, or just buy one top car, look after it, enjoy it and hope you can get your money back in a few years. A 911r for example.

[TheMonster]

trickywoo said:

Not if it's part of a missive bubble.

When people start thinking like you are it's a good indication we are near the top.

Don't know about classic cars but I thought stamps werethe first investment class to be in a missive bubble