What creative financial options are out there for acquiring a collector car? What do you need to be wary of?
By now in 2023, after a decade of making the case that classic and collectible cars should be considered as an asset class, there is widespread acknowledgment this is indeed the case. Unquestionably, we continue to witness an expanding ecosystem of services related to all manner of sourcing, understanding, moving, storing, exhibiting, media exposure, buying and selling, planning and financing of these assets, to name a few.
Given this growing global interest, and the value push that has accompanied the dynamic, oft-used financing alternatives are now increasingly being applied and offered in this sector.
Choices of financing for the borrower are determined by a number of factors, and they include creditworthiness and access to credit, appetite for additional debt, cost and terms of this debt, as well as holistically perhaps how an incremental acquisition fits into their overall portfolio from a financial/risk perspective.
While many hobbyists and collectors state they are not driven by financial factors aside from cost and ongoing affordability, this asset is not unlike others — the more you have of it, the more the risk profile changes. We don’t say that this is necessarily a good or a bad thing, but it becomes greater.
Given the array of approaches and cost, some of which are outlined by providers here, our suggestion would be that whatever route the borrower considers, there should be thought given as to how the financial and real asset exposure is structured, the risk/reward of incremental leverage, as well as how this should be incorporated in relevant financial and legacy planning. Depending on the magnitude of the exposure, consultation with tax, legal and planning experts is probably a worthwhile conversation.