JUN 24th 2015

Edward Legge ‑ Petrol Pensions

A little while ago I was introduced to a truly fantastic concept – the Petrol Pension. The theory is sublime – buy one or more cars that will increase in value, cashing in when the time is right to make a healthy return. Far more interesting and fun than putting your hard earned money into a boring and withered investment vehicle like an actual pension (NB – NOT financial advice).

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There is a problem though – one with which we should all be familiar: In 2008 the global economy collapsed and, from what I can gather, it was because people who wanted to make money got involved in a cycle of selling not-quite-kosher products to people who similarly wanted to make money. Spurred on by the promise of short-term financial rewards they willingly suspended their disbelief and bought and sold just about as many of these hastily re-packaged products as they could in the pursuit of financial gain – and the same thing is now happening in the classic car market. If I am wrong on the former point please accept my apologies.

I’m not talking about dealers. I’m talking specifically about the sworn enemy of the classic car enthusiast – the speculator. One of the terms we often hear when people are buying classics is ‘I’m buying it as part of my pension’. Now, last time I checked pensions weren’t considered to be a short-term investment plan, but plenty of people seem to see buying a classic car as just that. A short-term, tax-free gamble. The only difference is that, in the main, they are not willing to accept one of the key facts of investment – that they can go down as well as up. To be more specific, they don’t just expect classic car prices not to go down, they expect them to rise at a meteoric rate.

The first thing that I find many people now talk about when discussing classics is how much they have gone up in value or what they are worth. To the true enthusiast this should be irrelevant because they are involved for the love of cars, not the love of money. Classic cars and the property market are in many ways closely aligned. If you are a ‘flipper’ of properties then sooner or later you are going to lose out (or feel like you have). If on the other hand you are going to live in that property then the dynamic is different – your house rises and falls with the rest of the market so you never really lose out unless you cash out at the wrong time. The same goes with classic cars.

‘Keep your eyes peeled for great cars at good prices and give the speculators a good kick up the backside on their way out through the revolving door.’

What is interesting is that the very same people who should know better and go in with their eyes wide open are also the same ones that grumble and moan because they get their ‘investment strategy’ wrong. You can always spot these poor unfortunates because their expertise in cars always seems to be in inverse proportion to the amount of time they have been involved in the classic car hobby. They enthusiastically invest in their petrol pension and six months later are moaning to those that persuaded them to spend the money that their long-term investment isn’t producing the result they had hoped for. I’m sure HMRC would have a view on those who buy and sell classic cars with the express intention of making a profit. Apparently they even have a name for them – “motor traders”. Just ask Chris Evans.

This is great news for the classic car enthusiast as you can be assured that the very same impatience that drives speculators means that we now have unprecedented choice in the classic car market as well as the opportunity to get a bit of a deal. Keep your eyes peeled for great cars at good prices and give the speculators a good kick up the backside on their way out through the revolving door and remind them to be careful where they get their investment advice next time.

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