Investors looking to gear up their portfolios should steer their attention to classic cars, as values have rocketed.
The potential of making impressive profits from classic cars has been highlighted by one collector selling a Ferrari Testarossa at auction which was once owned by singer Elton John.
When the supercar, which has only travelled 2,100 miles, goes under the hammer, the owner should earn more than £110,000.
Sales of classic cars are booming as many buyers have seen their investments outperformed many other asset classes.
A recent report from consultancy Knight Frank has calculated that prices for classic cars have rocketed by nearly 400% in the past 10 years.
In comparison, the FTSE 100 has risen by 94% in the same period.
James Bond’s Aston Martin DB4
Many vintage car collectors believe that their investments are an affective hedge against recession since interest in the most desired vehicles remains strong with collectors worldwide.
It’s this interest from buyers which has seen demand for buying prestige vehicles soar, a fact illustrated by the Mercedes-Benz 300SL Roadster which has rocketed in price by 300%.
Better known cars such as the Aston Martin DB4, which is the original James Bond car, were fetching prices of £135,000 before the economic crisis, but now buyers are forking out £207,000 for the vehicles, which is a rise of 53%.
Another incentive for wealthy people to invest in classic cars is that, unlike stocks and shares and other traditional assets, the profits do not attract capital gains tax (CGT), which is paid at 28% for higher rate taxpayers.
Susan Spash, a partner at accountants Blick Rothenberg, said: “Classic cars are an investment free from CGT, which would otherwise be chargeable on UK residents selling investment assets and making a profit. This specific exclusion is because they are categorised both as ‘wasting assets’ and passenger vehicles.”
Other wasting assets
Other wasting assets, which are those items, which are predicted to last no more than 50 years, include caravans, pleasure boats and antique clocks.
For the man who is selling Elton John’s former Ferrari the potential profit could be huge.
If he was selling £100,000 in shares he would be hit with a CGT bill of nearly £25,000, taking into account the £10,600 annual threshold before tax is due.
However, anyone thinking of buying and selling classic cars on a regular basis should be aware that HMRC will consider you to be a trader and tax you accordingly.
Related Information
Below is a list of related articles you may find of interest.
