When older is better

Posted by Elizabeth Harrison in Personal Finance on 25 September 2013 - Elizabeth is a Senior Credit Analyst at checkmyfile.

Driving a classic car may seem like an expensive and risky option when you factor in reliability, maintenance costs, and the price to tax and insure, but in reality it can work out an affordable mode of transport which compares favourably in many respects with a modern car.

Unlike modern cars, classic cars can be relatively easy to repair and maintain yourself. The built-in interiors and computerised systems found in most modern cars mean servicing and repairing the vehicle is difficult without the required technology and tools. If you're a classic car owner, with a little know-how and a bit of work you can avoid hefty mechanics' bills by servicing your own vehicle and replacing parts yourself. (What's more you also get a mighty sense of achievement.)

Many doubt the reliability of an older vehicle but as long as the car is looked after and well-maintained it can be a reliable prospect. The problems often come when a classic car is rarely used or kept as a weekend plaything spending the majority of time parked in a garage. These cars were made to be driven and most will need regular use to keep the engine purring.

As far as tax is concerned, choose the right car and you may not have to pay tax at all. If your car was made before 1 January 1973 it is classed as a 'historic vehicle' and is exempt from vehicle tax. From April 2014 this exemption will be extended to all cars made before 1974. Furthermore, if you go as far back as a pre-1960 car, you won't even need to have it MOT tested.

For insurance, shopping around for the best deal is just as important with a classic car as it is with a modern car and can often work out a lot cheaper. If you only intend to drive the car occasionally then you can obtain classic specific insurance for many models for less than £100 per year. A VW Beetle for instance is one of the cheaper options and can be insured for £75 per year. But what's the point of having a classic car if you're not going to get proper use from it? Insurance for everyday use can still be found reasonably cheaply - especially if you use an insurer who specialises in classic cars. The expertise of a specialist may work to your advantage as the policies are more likely to take into consideration the specificities of classic car ownership. Joining a classic car club may entitle you to further discounts.

But why is it that classic cars can often be insured for less than the modern equivalent? A significant factor is the number of miles covered. The less a car is driven, the less chance there is of it being involved in an accident. Most classic car owners have another car which is used on an everyday basis so the classic car is driven less thereby reducing risk. Lower premiums are often offered with a mileage cap but shopping around means mileage caps do not have to limit car use as the mileage restrictions will vary between insurers.

Gerry Bucke of the insurance broker Adrian Flux Insurance Services says the make and model of a car will also be an important determinant of price. “Insuring an old Beetle even as your main run around will be cheaper than insuring a new model because it is slower and therefore less likely to be involved in an accident.”

The choice of a classic car also says something about the type of driver and the corresponding potential risk in the eyes of the insurer. A classic car owner is more likely to be an enthusiast, taking more care maintaining the car and driving carefully all of which makes for a safer drive.

But if those savings alone are not enough to convince you of the advantages of driving a classic car: it isn't going to depreciate in value in the same way as a new car, it's a lot easier to spot in a packed car-park and though it may take a bit of getting used to at first, it's a hell of a lot of fun to drive!

Elizabeth Harrison is a Credit Analyst at checkmyfile. She has a degree from the University of Manchester in French and German.

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