Important Considerations for Car Enthusiasts

Key Financial Planning Considerations for Car Enthusiasts

By: Cody Pollock, CFP®

Your Car: An investment or loss leader?

• Classic cars are fun, look cool and enjoyable to drive and show off, but rarely a money maker for their owners.
• Knowing the costs of owning a classic car is important: insurance, registration tax, repair costs and storage can all be big drains on your other assets.
• Some vintage car makes and models have skyrocketed in value over the last few years as retirees wish to re-live their high school glory years – while others continue to depreciate into oblivion. Make sure to keep this in mind when selecting your next project if you plan to use it as an investment vehicle instead of just a money pit.

Insurance Coverage and Registration

• Often times, cookie cutter insurance policies may not be sufficient or adequate coverage for the value of your classic car. It may be worth looking into classic-specific insurance policies with guaranteed replacement value, repair parts coverage and other benefits that are not often built into regular auto insurance policies.
• Registering your car as a collector could save you on vehicle registration tabs, subject to state mandated limitations. If you don’t use your ride as a daily driver, this change could be one of great savings.

Estate Planning Considerations

• Understanding how your car is titled will impact your overall wealth transfer strategy and estate plan.
• If you want to make sure a specific person receives your car, it may be worth exploring ownership options such as trusts or adding a Transfer on Death (TOD) to your valued ride.

Tax Implications

• Knowing the tax implications of owning, transferring and selling your classic car is crucial. Giving the car to an heir while you are still alive could be subject to Estate Tax gifting rules, or subject them to capital gains tax on appreciated assets if they end up selling them down the line.
• Understanding the rules for step up in basis on appreciated assets following a death could lead to different decisions around ownership, titling and transfer of your car.

Ongoing or Surprise Costs – Repair, Maintenance and Healthcare

• As cars get older, they need more routine maintenance – that means costs you need to plan for. Whether that is normal items like fluid changes, alternators, springs, brake parts, or a drivetrain rebuild. It is important to have a well thought out plan on how to cover these expenses.
• Knowing and understanding the rules around healthcare costs as your get older is crucial when you have additional important assets. If you were to run out of money and need care, the state has requirements on what you must spend down before they will chip in and help. Often this can leave your spouse with 1 car, the house and a small pool of money. This could put your prized car at risk of needing to be sold to cover these costs.

How we can help

Here at Signature Wealth Management, we believe in a holistic, all-encompassing approach to Financial Planning. We don’t just try to solve one part of the puzzle but aim to look at and analyze your whole financial life and all that it may encompass.

Take advantage of our complimentary, no obligation 40 minute ask-me-anything session to help get your pressing financial questions answered.

Schedule time with me: https://go.oncehub.com/CodyPollock

Whether you are trying to do things on your own, starting a family, thinking about or approaching retirement, or a retiree enjoying your golden years; navigating the financial landscape can be as complex as trying to tune your car’s carburetor. Our team at Signature Wealth Management can help you integrate your passion for cars into your overall retirement strategy, ensuring it does not become a financial liability but rather a sustainable part of your legacy. Whether it may be tax strategies, investment planning, retirement income or estate planning strategies – our team can help turn your love for all things gas powered into a sound financial plan.