Classic car collectors view their collection as an integral part of their legacy and want to make sure that this unique slice of their wealth is well protected and included in their estate plan. Involving a wealth manager early on not only ensures the protection of your collection, but it can create privacy for you as well, along with other benefits relating to taxes and management issues. In this article we are going to raise a few issues you need to consider in relation to classic car collections.
What constitutes a classic car?
There is no easy answer for this question. The Antique Automobile Club of America defines classic cars as vehicles that are more than 25 years old, while according to the Classic Car Club of America classic cars are “Fine” or “Distinctive” vehicles that were built and were produced between 1915 and 1948.
Are classic cars good investments?
Veteran cars can be solid investments, but collecting classic automobiles is not for everyone because of the lack of liquidity and the relatively high risks involved. A car collection is very much like an art collection, so when you are making the decision to invest, you must assess the potential costs and the investment return. It is wise to involve a financial expert or your wealth manager when thinking about investing in a classic car, so you make a well-informed decision that is in line with your plans.
What to consider when investing in a classic car?
Although interest in classic automobiles has grown significantly in recent years (estimated market value of classic cars was above $30 billion in 2020), we must keep in mind that a market like this can always change its direction, so investors should remain cautious. The rarest and highest quality models are considered the most stable in value, and they are probably the most liquid ones in this asset category.
When thinking about investing in a classic car, always involve an expert or your wealth advisor to help you with the valuation, because there is a lot to consider. The most basic factors are:
- Brand and model: well-established, sought-after, quality brands tend to represent higher value
- Age: is an important characteristic but that, in itself, is not enough
- Condition: is very important, as it significantly determines renovation and future maintenance costs.
- Mileage: low mileage may indicate better general condition
- Authenticity: documented vehicles, in many cases, represent stronger value
- Original components: vehicles with authentic, original components are considered rarer, therefore they tend to represent higher value
What is the best structure for owning a classic car?
The optimal ownership structure depends on a variety of factors, and must be aligned with your current wealth plan, so you need to consider many details before the purchase of a classic vehicle or the start of a collection. For many, these assets are very private and form a special part of their legacy, so finding the best long-term structure that enables them to finance, own and sell their collection in a tax efficient way, has utmost importance.
Buying a classic car can be a smart and joyous investment at the same time, but you must keep yourself from making impulse decisions. Patience, and working with an expert, will serve you well in the process. Primus Wealth has the knowledge and the experience to make the international systems work for you and find the optimal structure for your classic car or collection. Contact us, and our experts will be at your service to support you through the whole process.
