During our last episode of Men In Sheds, we covered the topic of car finance and why, what looks like hedonistic automotive freedom, is actually a horrible trap that locks you into a brand. I have to admit complete ignorance to this world before Andrew and I sat down for a cup of tea the week before and he explained it all to me.
I’m not a foolish man with money, not any more. However, when I left school, I was financially illiterate, and I think many of us are. I left college in 1998, walked into my first job, and was on the initial wave of the easy loans and credit card bombardment phase of that era. I made a lot of terrible financial decisions which I’ll get back to later in this piece.
For our “Car Finance Isn’t Freedom” episode, we did a lot of research. While my arithmetic skills are poor, I am pretty handy with a copy of Excel, and find a soul cleansing pleasure in being able to run the numbers in a bid to help me get my head around the bigger concepts. What started as simply breaking down the true costs of car finance deals led me to dream up this game of “Here’s What Ya Could’a Bought” where I drew up a list of classics available for the same cost. The reality hit me like an old English tonne of bricks. It’s been a long time since I’ve browsed through the classifieds in any detail — I’ve been through a rough five years in my personal life. I saw with my own eyes just how much car values had risen and was blown away. Now, I did see a Money program special a while back which documented how the 10% in society had watched their expensive car collector hobby become a shrewd investment scheme, but I’d not realised this is one of the few areas of social economics where the wealth benefits have been trickling down.
Classic cars, and by that I mean pretty much any desirable car over fifteen years old, are reportedly appreciating at between 5% and 20% per annum — and I believe it. I’d heard rumours that some of the hot hatches from my youth were now “fetching silly money” and have to admit rolling my eyes a little at the thought anybody would fork out a sizeable sum for a twenty year old 106 Rallye or AX GT, but they are.
What we discovered as a result of that research was staggering to both of us. Here are the numbers explained for the kids, like myself, at the back of the class; Let’s say you sauntered into a Fiat dealership right now, following up on their promo deal for their 500 Pop. You would have to have a mere £1,380 saved up for a deposit and willing to hand over £139 per month. Cheap, a lot of people would say. However, over that 4 years, you’ll have spent £11,630 before any maintenance, insurance, or road tax. You’ll have been limited to 6,000 miles and have three options available to you; Give the car back and walk away with nothing. Buy the car out for its second hand value. Trade it in for another deal. Given that only a Fiat dealer is going to give you a decent trade, that’s incredibly limiting and a poor predicament for someone who’s spent nearly £12K simply to drive around in a budget hatchback.
But this is where things get really interesting, and I appreciate many of you will be way ahead of me here, this is where we look at the costs of investing in classics. This is where people like myself typically see screens of numbers and are less Neo in the Matrix and more Clark Griswold in National Lampoons.
You can borrow £6,000 for the same monthly payment, at only 3.3% apr no less, add that to your deposit, and walk into a world of classic car bliss. We’re talking mint Mk2 Golfs, offensively clean 205 Gtis, clean as a whistle MGB GTs, and painstakingly well maintained Alfa Romeo GTVs. Cars that you can pay off in four years and still own at the end. Cars that will pique interest in other car fans. Cars that will show your character. Cars that we see driven by our idols on the big screen. Cars that have the knowledge base of owner’s clubs, specialist garages, and parts networks to keep them going. Plus, the real kicker, cars that will be worth more with every year that passes.
The bigger the numbers get, the more ridiculous things seem, and I advise watching our episode via SoundCloud or YouTube for those, but, long story short, the more you have, the more you chose to lose or make. It seems so painfully obvious now and makes me cringe when I look back at my past.
SUMMER OF ’98, MY PARENT’S GARDEN
Having just returned home from my first job, with the 1275cc A-series in my Mini still ticking and pinging from a high paced drive home. I proudly strode through the gate with my first PAYE slip in hand, much to the delight of my proud parents who, at the time, didn’t realise I wouldn’t be moving out for another ten years.
My dad then proceeded to give me the only financial advise he’s ever lent me in my lifetime. He explained that I had my earnings, minus my costs, and what was left was my disposable income. That was it. Now, my dad is a brilliant man with near encyclopaedic knowledge of pretty much everything. However, he is not a man led by money, which I kind of admire as a quality. That said, he’s also a baby boomer and I really don’t think what his generation had learned about money was of much use to mine.
This is, of course, not to say my generation hasn’t had it good. I was a 19 year old web designer in 1998, I had a good job and was payed pretty well for it. Nothing special, but enough to get me in a lot of trouble, like £20k+ of trouble in just five years.
I was car crazy and so were my friends. We spent all our “disposable income” buying and modifying what we could, and we had everything completely backwards. This was when Max Power and Revs were the religious scriptures to live by. Desperate to become the alpha male in the group, we would buy the fastest cheap cars we could afford and insure. I bought a Cavalier SRi for £1,500, spent twice that in accessories, and sold it for £1,250. I bought battered old Turbo Technics Sierra XR4x4 for £1,000, spent ten times that trying to turn it into poor man’s Cosworth, and broke it for parts. I spent beyond my means on stuff that had no value. I ended up in a terrible financial position. The kind where your credit cards are being rejected at the petrol station when you’re trying to to get to a potential job meeting. The kind where you can’t make loan repayments so the bank and loan company hit you with fines.
This is a pattern for me with cars, and perhaps one for you. I buy cheap, waste every penny I have, and pretty much give what I have away. While I have unusual cars, it’s rare for me to have a special car. The kind of car people ask you about, the kind of car that gets compliments shouted out from other drivers, the kind of car that people hang photos of on their garage wall as inspiration. That car for me was an concourse condition XR4i I bought for a bargain price and sold on for a little more than I paid for it. That was my one moment of getting it right and it was completely by accident.
I call my problem the mediocre middle mentality. Never buying the car my heart wants because they always seem overpriced and instead buying something that’s affordable but drops rapidly in value.
It didn’t help that my only real classic was a Mini. I kept that car for ten years. My sister drove it as her first car for some of those. I did try to sell it earlier, before the new MINI came out, but someone had bumped it while parked right on a body seam and I was too stupid to get it sorted out. Nobody wants a beautiful car with an ugly bruise. After ten years, it was rotten as a pair from the inside out. In the end, I sold that little knacker for £800. My Mini loving friend almost disowned me for selling it off so cheap (although his scrapped 8 years earlier). I felt like a bit of a failure. Who manages to lose money on a car like that?
I really think I got burned by my Mini owning experience. Imagine buying a classic painting only to watch the colours bleach away in the sun. Imagine buying a cottage only to witness it crumble to the ground it was built on. It reinforced a core belief in my mindset that nice things deteriorate regardless of how hard you try to keep them preserved. I cleaned that car religiously, never realising every splash of water was just helping feed the cancerous iron oxide forming in every drain channel and inner skin. At £3,750, my Mini was both the first and most expensive car I’ve ever owned. It’s hard not to subconsciously reference that pattern when trying to move forward. I see all cars as rot boxes now and that’s not always a healthy way to live as a car fan.
My fundamental problem is that, while I’ve been well off, I’ve always been cheap. One of the scary things about wealth disparity is the way it works over time. If person A is a little more wealth than person B at 20, they will typically be significantly more wealthy by 30. The gap widens exponentially. It widens because the best way to make money is to have money. I somehow have managed to make this privilege work against me because I’m let with emotion over facts and dreams over logic.
While “should” is a horrible word to live by, I should have repaired my Mini and sold it when I bought a new car. I would have lost nothing. I should not have bought a Cavalier SRi when I really wanted an Oak Green big bumper Mk2 Golf Gti. I would have lost nothing. My desires for a Sierra Cosworth should never have fallen short with an XR4x4. I would have lost nothing. Plus, if I’d still found myself penniless while owning any of those cars, I could have cashed back in at any point. Ultimately, I should have a car owning history to be very proud of and one that’s rewarded me throughout, allowing me to step up the ladder of classics each time.
I’ve seen the light now and I’m torn between pain and regret; Pain that I have no capital or means to fund investment in a classic right now. Regret that I’ve thrown money away in the past. I do feel empowered however, and I am spreading the word in the hope others don’t make the mistakes as me. I’m excited too, really excited, because I no longer see the opportunity to buy a classic as some foolish but something fool-proof.
They say the best time to plant a tree is twenty years ago and the second best time is now. It’s time for me to invest in something — myself. Time to invest in what matters — living. Time to invest in the things I love — cars.