First and foremost, you will have to excuse the use of “man maths”* throughout this article. The reality is that, in theory, it may be better to use saved cash to buy anything rather than take a loan.
*man maths is the ability for men/women to justify the purchase of something using questionable maths calculations.
Most of us are far richer in assets, through the greater increase in their value over time than in cash itself. There may also be many good reasons why cashing in savings, investments, bonds etc. might not always be the best option and this could be due to timing, break penalties or just because you prefer to keep a level of liquidity for rainy day requirements.
Over the last decade or so, there has been a substantial growth of interest in the classic car market, alongside the value of the cars. We believe this growth could be more sustainable than the boom and bust of the late 90’s. One of the key drivers of this sustainability are the many events and activities that can be attended together with your car such as Salon Prive, Concours de Elegance, Goodwood Revival to name but a few. At the same time, there is a greater appreciation for the fundamentals of supply and demand where exclusivity and rarity are prized possessions.
Having said that, like anything, the classic car market is not immune to macroeconomics and over the last 12 months, we have noticed values tailing off a little and therefore now; could be a good time to acquire your dream car.
Here comes the “man maths” part! Many of our customers are aware that all cars are currently considered by HMRC as depreciating assets and therefore do no attract capital gains when sold privately. Clearly many do, but if you have owned your Aston Martin DB5 since the early 90’s, where the typical purchase price was around £30k, it is now worth around 20x more than it was when you bought it, typically between £500-£700k today. It is possible that you can raise funds against its current value; subject to being able to afford the monthly repayments effectively this could make the interest and monthly repayments effectively moot, as depreciation is often the single biggest cost of owning a car where classics unlike modern cars tend to depreciate more slowly, if at all. Of course, you could also sell it for a handsome profit.
At Cambridge & Counties Bank, we have helped many customers acquire or release equity from a wide range of cars, and in almost all cases the customer could have afforded to use cash or reserves.
So why use funding, well…
- Interest rates are still at historical lows and as such the cost of finance to purchase your dream car can be deemed reasonable. Our rates are fixed for the period, so you lock into those costs.
- We tailor the loan to your requirements. If the car is a “keeper” we can arrange the loan over a longer period of up to 7 years and thus reduce the monthly payment. Alternatively, if it is just something to enjoy for a few years and then move on to the next desire, we can tailor the loan over a shorter period but with a large deferred capital or balloon payment which can reduce your monthly payments substantially and is based on the predicted future value of the car.
- As the saying goes “cash is king” using finance rather than your saved money ensures that you maintain your liquidity in case it is needed.
As you would expect, our loans are tailored to each individual, car and transaction. I am proud to say no two deals we have drawn have been the same.
These are just two examples of deals we have written recently.
- Our customer had a beautiful Ferrari 275 GTB and an Aston Martin DB3S, comfortably worth more than £3.75m between them. We released £1.5m back to our customer on an interest only basis and he used that to purchase shares in his company.
- We had a customer purchasing a rare 1971 Porsche 911 ST worth £750k, he was also purchasing a BMW 2002 and a Porsche 911 GT3. By adding three other cars from his collection, we were not only able to fund the purchase of the 3 cars but also release around £250k in equity back to him to put towards further purchases.
The one thing that really differentiates us from other funders in the classic car finance market is that we truly share a passion for cars and can quite easily talk all day long about the merits of a Jaguar E Type, or concours wining DB6, as well as wax lyrical about a Ferrari 488 Pista or an Aston Martin Vantage GT3 race car.
Man maths can justify the purchase of anything if you try hard enough. If you are interested in discussing options or just want a chat about the classic, vintage or sports car you own, or desire please get in touch.
You can get in touch with me, Tom on 0116 366 7922, or my colleague Neil, Head of Classic, Vintage & Sports Car Finance on 07850 506935. Alternatively, email: firstname.lastname@example.org or visit: classiccarbank.co.uk