Can You Make Money Investing In Cars? - Times Money Mentor (2024)

The idea of making money from buying and selling fabulous vehicles is all but irresistible to many a motoring fan.

But putting your cash into four wheels brings substantial risks and requires some serious know-how.

This guide should help you avoid skidding into a financial ditch.

This article will cover:

  • Best investment cars
  • How should I look after my car?
  • How do I sell a car?
Can You Make Money Investing In Cars? - Times Money Mentor (1)

To start with, what do we mean by making money from cars?

Your first thought is probably that it’s to do with investing in the classic car market or in vintage vehicles – and that’s certainly how some people have made a bob or two over the years.

But in today’s gig economy it’s also to do with renting out your car, whether it’s the family runabout or something more special, for a day or two at a time or just a few hours.

Watch out though, the second-hand car market is notoriously difficult to navigate and vehicles can quickly become money pits.

So before you send your savings on a white knuckle ride, think seriously about the financial side, not just the fun.

Which models might do well?

If you’re sure that investing in a vehicle is for you, you need to find a vehicle that is the right fit in terms of cost, condition and how much you want to drive it.

You might have your heart set on a particular model such as a modern classic such as a Ferrari 328, but not every passion can be turned into a profit.

For more on investing in alternatives such as art, cars or wine, check out our Guide to passion investments.

The most important thing to bear in mind is that most cars will simply never be an investment that will yield a profit.

And even if there is a profit, it will often be modest. You’re paying for the joy of owning a vehicle you cherish – and bragging rights!

The value of a car depends on various factors, including the number made, how many are on the market at a particular time, the mileage and, of course, the condition.

Car expert Adam Hay-Nicholls suggests selling barely used and rare cars from the 1980s and 1990s, and advises against investing in some of the most famous “supercars” like Ferraris.

“Certain Mercedes – 1970s saloons and the SL – are good buys, though less desirable than its vehicles from the 50s and 60s,” he says.

“Lamborghinis are still going up. Lotuses are cheap and I think they might be in for a renaissance.

“Cars generally from the 50s and 60s are already inflated because the people who had posters of them on their bedroom walls are now 55+ and have bought them all.

“Instead, get a car that was on the bedroom wall of people who are between 35 and 40 – in the next ten years they’ll be in demand.

“That’s everything from the VW Corrado, BMW 6-Series and the Ford Escort Cosworth through to the Aston Martin DB7, Porsche 993 and Lamborghini Diablo.

“Either that or cars from the same period that are really rare, like the Lotus Carlton, Saab 99 and Citroen CX.”

If classic muscle cars, like the Ford Mustang, set your pulse racing, don’t forget that these beasts are super fuel-thirsty, so if you fancy a road trip be prepared to splash the cash.

On the other hand, if you buy a classic or rare car that is more than 40 years old, it will be exempt from road tax.

Some vehicles are so iconic, though, that people don’t care how much fuel they guzzle – think the Aston Martin V8 Vantage or the Porsche 993 Carrera 2.

But even supercars aren’t exempt from falling prices.

Among the exceptions seem to be certain models built in very limited numbers by the likes of McLaren, Ferrari or Porsche.

You’ll need a very hefty bank balance to zoom off in one of these so it’s at the lower end of the market that most of us are looking to pursue our passion for cars with a view, perhaps, to turning a profit.

But navigating the second-hand market can be like walking into a den of vipers – make sure you don’t get bitten.

When you feel that heart-thumping excitement because you’ve found “the one”, it’s best to take a step back.

Ask yourself: have you done enough research into the car’s value, provenance and condition?

The Historic Automobile Group International (HAGI) tracks prices of cars across several indices, and insurance company Hagerty offers various tools that can help you determine the value of the car you dream of driving.

If a model you are interested in has already risen in value, others may have more room for growth.

You don’t need a Richie Rich amount of money to buy a car that could rise in value.

Read Jenefer’s story on how she saved £5,000 off her new car after joining a discount scheme for teachers, NHS workers or public sector workers.

A Jaguar XJS in top condition, for instance, is a classic that experts say is unlikely to depreciate and can be had for under £15k.

Best investment cars

If you’d prefer to buy and enjoy a vehicle that is a bit more affordable than the investment classics – but that should still hold its value fairly well – here are five to consider, according to the sporting estate Goodwood.

  1. Volkswagen Golf GTI Clubsport Edition 40
  2. Audi A2
  3. Mazda MX-5 NA/Mk1
  4. Toyota Celica GT-Four
  5. McLaren 675LT

How should I look after my car?

The question that will be in the mind of every prospective car investor is: can I drive it?

The answer is yes, a little.

If you are solely interested in making a profit, you might be tempted to leave the vehicle in the garage until its value goes up, but that’s also a no-no.

Cars need to be driven every now and then to maintain good health in regard to brakes and hydraulics, and the engine should be fully warmed up at least once a month.

A car will only rise in value if it is maintained exceptionally well, but maintenance and insurance costs can be eye-watering and can cancel out any potential increase of the vehicle’s value.

Read Joe’s story on how he saved £6000 on a car and £730 on car insurance.

You can save money by setting up a regular care and maintenance costs schedule, as this can preventbig and potentially very costly problems.

In particular, tending to a vintage car – one dating from 1930 or earlier – can require huge amounts of knowledge and experience.

Experts recommend regular oil changes, keeping the car clean, dry and waxed to prevent corrosion and damage to the paint, greasing ball joints, flushing the cooling system and testing brakes regularly.

Some car enthusiasts carry out such maintenance and insuranceto keep the costs down.

The correct storage of an investment vehicle is also crucial, as exposing it to damp conditions can be damaging.

If you undertake any repairs or changes, keep your car as original as possible, as adding modern features to an older model can diminish its value.

Getting the right insurance for your car is also key, and your insurer will need to know about any changes or modifications you make to it.

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Are there other ways to make money from a car?

Yes. Peer-to-peer car lending has enjoyed some serious tailwind in recent years, and there is no sign of stalling.

The platform Turo is one of the big players in this sector: car owners make cash by offering them for daily rental, for sometimes several hundred pounds per day.

Turo takes25% commission from each rental.

The average car owner in London registered with Turo makes about £500 a month sharing their car 8-12 days a month.

The company has 14 million users worldwide, with around 7,000 cars listed in the UK, ranging from VW Golfs to Ferraris.

In the US, Tesla and Toyota Prius are the two most popular models on the platform.

Hiyacar and Getaround offer similar peer-to-peer car renting services.

Naturally, renting out a car bears risks, particularly if it’s a classic, and is perhaps not compatible with hoping that the car’s value will increase over time.

However, it can turn your car into an earnings engine while you have it.

How do I sell the car?

It can be tricky to sell an expensive or rare car privately.

The biggest hurdle is that may people contemplating such a purchase are looking to finance it over a few years, rather than handing the seller a hefty lump sum for the whole price.

The two main auctioneers for rare cars are RM Sotheby’s and Bonhams. They offer free estimates on what your car might sell for.

Cars worth more than a couple of million are much more likely to go to auction because they could fetch a lot more should a heated bidding war develop.

Less valuable cars in mint condition that are desirable but not very rare might be best sold through dealers.

If the car needs some restoration however, an auction is often the best way forward.

It’s worth looking at markets and demand abroad – as tastes and trends vary dramatically across the globe.

The Raggare scene is flourishing across Scandinavia for instance – a subculture predominantly dedicated to American hot rod cars from the 1950, 60s and 70s.

Do I have to pay capital gains tax when I sell?

Although you may have to pay capital gains tax on the sale of some types of personal possessions, such as art or antiques, cars are normally exempt unless they’ve been used for business.

It’s worth being aware that racing cars, single seat sports cars and taxis are types of cars that are not exempt, and capital gains tax may be due when you sell.

To see how much CGT you might have to pay, see our Guide to capital gains tax.

What happens to the road tax when you sell a car?

Any remainingroad tax youhave whenyou sellyourcardoes not transfer to the new owner.

Instead, the seller should cancel their tax by telling the Driver and Vehicle Licensing Agency (DVLA) that you no longer have the vehicle or it’s off the road.

You can get road taxrefund for any full months of remaining tax.

The potential buyers of the car will need to pay to re-taxthecar.

Important information

Some of the products promoted are from our affiliate partners from whom we receive compensation. While we aim to feature some of the best products available, we cannot review every product on the market.

I'm an enthusiast with a deep understanding of the world of investing in cars, particularly the intricacies of the second-hand car market. My expertise extends beyond the surface level, delving into various aspects such as identifying investment-worthy models, maintenance strategies, and even exploring alternative ways to make money with cars.

Let's break down the concepts covered in the article:

Best Investment Cars

Investing in cars involves finding the right fit in terms of cost, condition, and potential for appreciation. The article suggests that not every car can be turned into a profit, and the value of a car depends on factors like production numbers, market availability, mileage, and condition.

Expert Adam Hay-Nicholls advises against investing in some famous supercars like Ferraris and recommends certain models from the 1980s and 1990s, as well as cars from the 35-40 age group's "bedroom wall" era. The article also mentions iconic but fuel-thirsty cars like the Ford Mustang and exceptions in limited-production models by McLaren, Ferrari, or Porsche.

How to Look After Your Car

Maintaining a car is crucial for its potential to appreciate. The article emphasizes the need to drive the car regularly for health maintenance and advises against leaving it in the garage solely for investment purposes. Regular care and maintenance, especially for vintage cars, are highlighted, including oil changes, keeping the car clean, and proper storage.

Other Ways to Make Money from a Car

Peer-to-peer car lending is discussed as a viable option, with platforms like Turo allowing car owners to make money by renting out their vehicles. The risks associated with renting out a car, especially if it's a classic, are acknowledged.

Selling the Car

Selling an expensive or rare car can be tricky, and the article suggests options like auctions for rare cars worth more than a couple of million. Different avenues, such as selling through dealers or auctions depending on the condition, are mentioned. The global market is also considered, as tastes and trends vary worldwide.

Capital Gains Tax and Road Tax

The article clarifies that cars are generally exempt from capital gains tax when sold, except for certain types like racing cars, single-seat sports cars, and taxis. It also explains the process of handling road tax when selling a car.

In conclusion, the article provides a comprehensive guide for enthusiasts looking to invest in cars, covering everything from choosing the right models to maintenance, alternative income streams, selling strategies, and tax considerations.

Can You Make Money Investing In Cars? - Times Money Mentor (2024)
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