Fintech is coming for car enthusiasts

► Mutual funds explore the cars we love
► Ordinary people may make money from engines…
► But at what cost?

What is this madness? A rare Hot Hat earns £8,000 in nine months, and when it finds a new buyer, 1,000 people share the profit. Everyone is a winner?

Maybe not. Because it means the modern classics stray more from the budget of most car enthusiasts. Let me explain what is going on, and why it is important.

At a time when interest rates are at their lowest, many people look at investments as a way to get around banks/income tax protection, depending on your point of view. Even the asset management firm, Hargreaves Lansdown, believes it has 69% more millionaires in Isa now than it did in 2020. Applications are emerging, Bitcoin is being mined, and Ethereum is likely a thing.

The use of cars as investments used to be the preserve of the wealthy. The people who sealed off car caves so tightly that they could simply leave a Jaguar E-type for 20 years waiting to be appreciated were generally very few distinguished – Eton graduates, steel magnates and the like

But something new is looming. Micro investment funds promise to bring investments to people of ordinary means. It is easy to understand. It basically allows “investors” to buy partial shares in something, rather than directly owning it. In this context, it means buying a part of the car rather than the whole car. If they are sold for profit, the investors will reap the rewards.

Recently, a partial investment fund called Car Crowd paid a total return of 32% after nine months on a 2002 Renault Clio V6. I spoke to its CEO, David Spekett. He is a real car guy and now employs four employees to look at upcoming cars, buy them, and then sell stock with the goal of making money for people.

CarCrowd bought Clio (above) for £28,000, charged a £2,000 regulatory fee, and then sold 1,000 shares at £30 each. It was then sold for £38,000. Everyone is a winner.

Well, except for the cognoscenti without money. Like many enthusiast cars, the Clio V6 has a great story behind it. Renault was looking for the flagship Clio to sit atop the Renaultsport models. Designer Axel Brion had the Twingo body painted on the shell of the Ferrari 308. So when these ideas came together, the mid-engined Clio was born. Full brilliance and madness.

But do you think anyone ever sat down and said, “I really hope that one day someone can own 0.001% of these”?

Spekett tells me that his team is looking specifically for modern classics. Under the radar things that can be sold for more money. Things that we ordinary enthusiasts by ordinary means love and buy. Think £7,000 of a BMW 550i, £10,000 of a Porsche Boxster and £20,000 of a Maserati GranTurismo.

What happens if all these cars are bought by investment companies with the investor’s money? Even if you invested part of the car, you will not be able to drive it. This will make the car lose money of course.

Chuck is in the normal assembler/auto dealer and the supply/demand algorithm moves far and away from the reach of the car enthusiast. In real 2022 we have a new crisis.

Do you agree or disagree with Murray? Let him know in the comments below

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