PH Service History: Loan Rangers

Taking out a loan to buy a future classic isn't entirely crazy - not if it'll pay off the interest by appreciating in value

So, borrowing to buy a car, eh? Par for the course, these days. Most people in the UK now buy their cars using some sort of finance arrangement, after all, and even those who don't any more have probably tried it at some point in the past.

And while the relative merits of a PCP or HP deal are debatable, in these days of super-low interest rates, a personal loan looks like an attractive way of doing things. Especially if you want to get your hands on a cheap modern classic, but haven't quite got the capital to hand.

But of course, borrowing to buy an automotive toy is somewhat different to buying a daily on finance. Is it really sensible? Well, as with all good things in life, your conscience is probably urging you to answer 'no'. But at the moment, I actually think there's some sound reasoning behind this way of doing things - especially if you haven't got enough capital to be able to afford a second car out of your savings, or don't want to endanger them.

There are, as always, a couple of caveats. First, find a car that's going to appreciate in value, even if it's only by a little. Then, stick to a small loan amount. That way, the amount of interest you're paying can't exceed the appreciation your car experiences during the loan period - and if times get tough and you can't afford the monthly repayments any more, you can always sell the car and pay off what you owe.

£5000 isn't obscene, and is enough to get you into something enjoyable; after three years, it'd have cost you around £400-500 to borrow this much, so find something that's gone up in value more than that and you'll be laughing. What's more, £5000 is about the least you can borrow before interest rates start to creep up, as they do with smaller sums. Believe it or not, from some lenders you'll pay less to borrow £5000 than you will to borrow £4000.

Finally, choose your car carefully. Because, at the end of the day, this way of thinking is worth naught if you buy an old snotter that needs thousands of pounds throwing at it. Of course, any old car will need maintenance - but if you can minimise that with a car that's proven reliable and cheap to fix when it does go wrong, you might find its appreciation will cover even these costs.

Of course, something like this early Porsche Boxster rather flies in the face of that last rule. With the potential for RMS faults and porous engine blocks, these early cars' prices are depressed for a reason, and probably not the best option if you're risk-averse.

Having said that, this example has already managed to cover 111,000 miles - and there's a school of thought that if it hasn't broken yet, it's probably one of the good ones and it won't. Happily, if my Porsche knowledge is correct, then IMS bearing issues are less of an issue what with this 2.5's double-row bearing rather than the troublesome single-row item that caused so many problems in the later models; what's more, as a 1997 car it was made before the various liner issues that compounded the 986's bad name took hold.

And in terms of risk vs reward, the 986 has an advantage, because it's one of the safest bets to rise in value in the coming years. It's likely that an early, amber-indicator car like this one will be one of the most sought-after, too, as it's the closest in design terms to the original Boxster concept car and still fast and fun enough to be interesting. If it gives you no issues on the reliability front, this could be a real joy to own.

What I've done so far here is to tell you to play it safe if you're sinking loan money into a modern classic, then show you a 986 Boxster, one of the most potentially ruinous things you could buy. Ahem. So let's calm down a bit and look at some more sensible options, shall we? Beginning with this beautiful old E34 525i Sport. Now, E34s have been slowly but surely heating up over the past few years, but I reckon before long the Sport models, with their M5-esque styling, tweaked suspension and limited-slip diffs, are going to start to separate themselves from the pack and really fly in value, in much the same way as happened with the E30 before.

Granted, this 525i is less desirable than a 535i, but its value is only going one way - and as a later M50TU-engined model, this one kicks out 189 super-smooth horsepower, which isn't far off the original 535i's output. It hasn't been messed with, and the colour scheme is just perfect, too - Avus Blue over grey leather, with beautifully matched smoked wood infills and M-striped gaiters. What a fab place to spend time, and given there are no known histrionics to worry about, a very smart place to sink your £5000 loan.

Or how about something a little less obvious? This Mk3 Golf VR6 looks like a cracking buy. Fully historied and in impressive condition, it's just the sort of thing you want as an investment piece. But hang on, I hear you say - a Mk3 Golf? Well, let's not forget the VR6 was a joyous thing, all six-pot noise and terrific acceleration, and it handled better than most Mk3s too, with tremendous grip and some lift-off oversteer available to those with quick reactions.

People will soon start to cotton on to this; together with the Mk3's oh-so-90s looks, I reckon that means these are one of those little gems that'll start to climb in value when your back is turned. In any case, I can't believe one as good as this will still be this cheap in a three years' time, so chances are you'll make back your cash and your interest. What of reliability, though? Well, the Mk3's pretty robust and technologically simple, so even if things do go wrong, it shouldn't cost you the earth to fix.

But if out-and-out reliability is what you're after, something Japanese sounds tempting. And I reckon you could do an awful lot worse than this lovely old third-generation Honda Prelude. No, your eyes do not deceive you: it's a genuine 4WS with a manual gearbox and low mileage.

Such things do not crop up often. And while they're one of those less well-known 1980s classics - which is probably why they haven't yet gone stratospheric like some others - their ineffable 80s-ness combined with their rarity will one day make them quite desirable. Perhaps the Prelude won't shoot up in value - but like the Golf, I'd be surprised if you didn't make the cost of your interest back in three years' time.

Still think borrowing to buy a classic is a daft idea? Well, then I'm probably not going to convince you otherwise. But I do think done sensibly and carefully, it's a terrific way to own an interesting car you might not otherwise be able to afford.

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Vergis

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