Are classic cars a valuable investment?

One passion of mine is classic cars and kit cars, and due to my role at Pierce, I often get asked if they make for good investments.

Mark Walmsley Pierce

By Mark Walmsley, associate director at Pierce.

Normal cars decrease in value as soon as they are driven off the sales forecourt. Classic cars often maintain and increase in value, and some models are being sold at auctions for eye-watering, multi-million pound sums.

According to the Knight Frank Luxury Investment Index, in 2017 classic cars drove a 28 per cent return on investment over 12 months.

When viewed from a tax stance, classic cars are deemed as ‘wasting assets’ exempt from capital gains tax. So long as it hasn’t been used for business purposes or tax allowances haven’t been claimed on the vehicle, a classic car could make for a tax efficient investment.

However, there are many costs that need to be factored in, such as services, parts, MOT and insurance.

Individuals buying and selling classic cars with the main purpose of making a profit may also be seen as a trader in the eyes of HMRC and profits could be subject to income tax rates as high as 45 per cent.

Therefore, it is imperative to take professional advice to mitigate the tax due. One option is to operate through a Limited Company. Owning classic cars is a great hobby. It can also be a good investment if you have a strong knowledge of cars. If not, join an owners’ club, visit car shows and read car forums online, though it can take time to immerse yourself.