Want to share a GT3/360/Vantage?
Discussion
I awoke at 3am with an idea that seemed flawless but is probably hopelessly flawed once considered carefully but here goes:
10 of us (ideally based in central London) buy two c£40k cars to share. I'm thinking 996 GT3 / Aston Vantage / Ferrari 360... i.e. we pay £8k each.
We pay a monthly sum for maintenance, insurance, (secure covered) parking, tax & upkeep. I guess a budget of £100 per month for each car would be ample.
We split the year into weeks and share them equally so that we each get c.5 weeks use of each of two cars.
We sell the cars after an agreed term, and share the proceeds equally. This should have the advantage - unlike other car clubs - that we each have an interest in preserving the value of the cars.
For transparency, accountability and good governance, it could be structured as an investment club. Any (probable) losses could perhaps be offset against capital gains?
We would try to agree rules on one sheet of A4 with an emphasis on common sense & responsibility e.g.
- return the cars clean inside & out
- return cars with fluids topped up
- agree a sensible way of moving keys between drivers. Either by direct handover at place of work, or by same day courier.
Total cost could be in the region of £11k over three years if the cars are sold for half of purchase price.
Anyone interested?
10 of us (ideally based in central London) buy two c£40k cars to share. I'm thinking 996 GT3 / Aston Vantage / Ferrari 360... i.e. we pay £8k each.
We pay a monthly sum for maintenance, insurance, (secure covered) parking, tax & upkeep. I guess a budget of £100 per month for each car would be ample.
We split the year into weeks and share them equally so that we each get c.5 weeks use of each of two cars.
We sell the cars after an agreed term, and share the proceeds equally. This should have the advantage - unlike other car clubs - that we each have an interest in preserving the value of the cars.
For transparency, accountability and good governance, it could be structured as an investment club. Any (probable) losses could perhaps be offset against capital gains?
We would try to agree rules on one sheet of A4 with an emphasis on common sense & responsibility e.g.
- return the cars clean inside & out
- return cars with fluids topped up
- agree a sensible way of moving keys between drivers. Either by direct handover at place of work, or by same day courier.
Total cost could be in the region of £11k over three years if the cars are sold for half of purchase price.
Anyone interested?
It's a good idea but like all things the devil is in the detail.
Having owned a share in a racehorse I can say from experience it is the unforeseen and not previously discussed things that cause the big problems.
What happens if someone crashes? Who pays for the increased insurance premiums? Who pays the excess? What happens if it is written off? What do you do if someone has a car park scrape and it needs £1000 worth of paintwork? Do they pay or are the costs shared?
Our horse was injured in training and as I only wanted a few fun days out at the races in the summer, so to have it out for the entire summer season and then run terribly in the winter (last by 146 lengths!) I was pretty pissed off I wasn't drinking Pimms in the summer sun.
Likewise if someone writes the car off before I even got to drive it I would be very annoyed at then being asked for more money for the excess, insurance increase or money for a new car.
If you can afford a car like this then you buy one, but people who go in to part ownership usually can't afford it alone and so when a big bill comes if they have to take responsibility for the whole cost it is at best a nasty shock and worst a real problem. It may only be an 8k share but it's still a 100k car when it comes to repair/bill time.
Unless every single detail is discussed and written out in detail beforehand then these things very rarely work in practise.
Having owned a share in a racehorse I can say from experience it is the unforeseen and not previously discussed things that cause the big problems.
What happens if someone crashes? Who pays for the increased insurance premiums? Who pays the excess? What happens if it is written off? What do you do if someone has a car park scrape and it needs £1000 worth of paintwork? Do they pay or are the costs shared?
Our horse was injured in training and as I only wanted a few fun days out at the races in the summer, so to have it out for the entire summer season and then run terribly in the winter (last by 146 lengths!) I was pretty pissed off I wasn't drinking Pimms in the summer sun.
Likewise if someone writes the car off before I even got to drive it I would be very annoyed at then being asked for more money for the excess, insurance increase or money for a new car.
If you can afford a car like this then you buy one, but people who go in to part ownership usually can't afford it alone and so when a big bill comes if they have to take responsibility for the whole cost it is at best a nasty shock and worst a real problem. It may only be an 8k share but it's still a 100k car when it comes to repair/bill time.
Unless every single detail is discussed and written out in detail beforehand then these things very rarely work in practise.
sideways sid said:
Total cost could be in the region of £11k over three years if the cars are sold for half of purchase price.
Sorry another consideration. You would obviously need to consider carefully the mileage a car could 'suffer' to achieve the residual you want. Therefore what happens if you agree to do 1,000 miles a month (in total) and one decides he's going to do a 1,000 miles+ in a week. Who suffers the additional loss in residual or do you work in an excess pence per mile above agreed miles? Good in theory but I'd imagine hard to administer in practice.
Also:
sideways sid said:
For transparency, accountability and good governance, it could be structured as an investment club. Any (probable) losses could perhaps be offset against capital gains?
Per the revenues CGT manual:CG76906 - Wasting assets: passenger cars
Any motor vehicle which was constructed or has been adapted to carry passengers is not a chargeable asset unless it is of a type which is not normally used as a private vehicle and is unsuited for such use. Normal motor cars are, therefore, exempt from Capital Gains Tax. This includes vintage cars of this type.
Edited by mx stu on Monday 25th February 13:27
Thanks for the feedback guys.
As I said, this was not a particularly well-thought-out idea, but with the pointers raised, it could perhaps be workable. Although I admit it may not be. It sounds like managing this so that the cars are available as much as possible in top condition, with as little downtime, uncertainty and extra cost to owners, would be pretty difficult.
A few thoughts in reponse to some of the points raised:
It is absolutely critical to agree terms in advance of any kind of venture or purchase that involves more than one interest in any particular asset, and I would not suggest proceeding without doing so.
Fractional ownership seems to work for boats, planes, helicopters, property, etc and one imagines that the model can be reworked for cars. The major difference is that control of the other assets lies with someone other than the user/ultimate owner i.e. crew. Clearly with cars control is with the driver. I'm not an expert on this type of thing so any further tips welcomed.
My suggestion was that if people treat this as an asset that they own - with a residual value at stake - there might be greater consideration than for a rental car.
The very valid points about damage and/or write-off would be the same as for any other vehicle that is owned personally; the car is fixed at a garage or an insurance claim is made and another car purchased after the insurance company pays out. Obviously the car cannot be used during this period in exactly the same way as a personally-owned car.
My guestimate of £100 each per month, per person, per car works out at £12000 per year for each car. I have not built a spreadsheet, but had guessed that this would cover garaging, road tax, insurance, warranty, servicing and leave a contingency fund for repairs. Obviously certain repairs might be covered under warranty.
The question of payment for accidental damage could perhaps be covered with an excess arrangement, whereby the owner with the keys at the time pays the first £xxx, with any remainder met by either the contingency fund &/or an insurance claim.
As mx stu says, there is also a question of mileage - if one driver does massive mileage compared to the others, is there any kind of penalty?
I had suggested ownership by an Investment Club, which I believe has legal entity, but doesn't require formal accounts, thereby keeping costs down. However, the cars could be owned by a LtdCo or Limited Partnership. Again, structure would need to be agreed among all owners, to meet legal requirements, transparency, governance, and any tax considerations.
The administration point is a good one. I can see four main options:
- the owners agree to do all admin among themselves, (Personally if I own a car and have to take it to the garage bi-annually, MOT station annually, etc, I don't mind doing one trip in ten if everyone else is happy to do the same.)
- the owners agree to pay somebody else to do everything - perhaps outsourced to a car fleet specialist
- the owners agree that one or more of them will do the admin, with expenses paid by everyone from the fund at an agreed hourly rate
- the owners agree a combination of the above.
I suggested that owners would have the cars for 5 weeks each, with the remaining 2 weeks available for admin/repair/servicing/MOT time but I may have underestimated time required for this.
harveybobbles, thanks for your info. Out of interest, did you proceed with the fractional ownership idea?
mx stu, thanks for clarifying CGT rules - I suspected that cars would be disallowed. Is this the case with shares in a Ltd company that owns cars as an asset?
As I said, this was not a particularly well-thought-out idea, but with the pointers raised, it could perhaps be workable. Although I admit it may not be. It sounds like managing this so that the cars are available as much as possible in top condition, with as little downtime, uncertainty and extra cost to owners, would be pretty difficult.
A few thoughts in reponse to some of the points raised:
It is absolutely critical to agree terms in advance of any kind of venture or purchase that involves more than one interest in any particular asset, and I would not suggest proceeding without doing so.
Fractional ownership seems to work for boats, planes, helicopters, property, etc and one imagines that the model can be reworked for cars. The major difference is that control of the other assets lies with someone other than the user/ultimate owner i.e. crew. Clearly with cars control is with the driver. I'm not an expert on this type of thing so any further tips welcomed.
My suggestion was that if people treat this as an asset that they own - with a residual value at stake - there might be greater consideration than for a rental car.
The very valid points about damage and/or write-off would be the same as for any other vehicle that is owned personally; the car is fixed at a garage or an insurance claim is made and another car purchased after the insurance company pays out. Obviously the car cannot be used during this period in exactly the same way as a personally-owned car.
My guestimate of £100 each per month, per person, per car works out at £12000 per year for each car. I have not built a spreadsheet, but had guessed that this would cover garaging, road tax, insurance, warranty, servicing and leave a contingency fund for repairs. Obviously certain repairs might be covered under warranty.
The question of payment for accidental damage could perhaps be covered with an excess arrangement, whereby the owner with the keys at the time pays the first £xxx, with any remainder met by either the contingency fund &/or an insurance claim.
As mx stu says, there is also a question of mileage - if one driver does massive mileage compared to the others, is there any kind of penalty?
I had suggested ownership by an Investment Club, which I believe has legal entity, but doesn't require formal accounts, thereby keeping costs down. However, the cars could be owned by a LtdCo or Limited Partnership. Again, structure would need to be agreed among all owners, to meet legal requirements, transparency, governance, and any tax considerations.
The administration point is a good one. I can see four main options:
- the owners agree to do all admin among themselves, (Personally if I own a car and have to take it to the garage bi-annually, MOT station annually, etc, I don't mind doing one trip in ten if everyone else is happy to do the same.)
- the owners agree to pay somebody else to do everything - perhaps outsourced to a car fleet specialist
- the owners agree that one or more of them will do the admin, with expenses paid by everyone from the fund at an agreed hourly rate
- the owners agree a combination of the above.
I suggested that owners would have the cars for 5 weeks each, with the remaining 2 weeks available for admin/repair/servicing/MOT time but I may have underestimated time required for this.
harveybobbles, thanks for your info. Out of interest, did you proceed with the fractional ownership idea?
mx stu, thanks for clarifying CGT rules - I suspected that cars would be disallowed. Is this the case with shares in a Ltd company that owns cars as an asset?
In the case of aircraft, it is not always the case that they are crew-operated. Plenty of light aircraft and gliders are owned jointly by the people that will fly them, and the issues with maintenance, hangarage, insurance etc all crop up there but are not insurmountable. I think there are even iPhone apps that will let you work out bookings etc.
I guess the main difference between cars and planes is that a plane will have longer intervals between services (in terms of "usage") and will not depreciate as much as a car might if used heavily.
I guess the main difference between cars and planes is that a plane will have longer intervals between services (in terms of "usage") and will not depreciate as much as a car might if used heavily.
sideways sid said:
mx stu, thanks for clarifying CGT rules - I suspected that cars would be disallowed. Is this the case with shares in a Ltd company that owns cars as an asset?
In that case any loss that arose in the Ltd company would stay within the company, it wouldn't be available for the shareholders to use in respect of any gains they have made. I think if it operated as a partnership the partners may get the benefit of any CGT losses? I think you are likely to open up an absolute minefield when it comes to the tax aspects. One of those being whether a company car benefit would arise? You'd need at least one director and I think a benefit would arise on them.
Like communism - a great idea in theory!
I seem to remember reading a blog about three chaps who part shared a 944 as a track day car so low costs etc. I think the initial excitment took pain to other commitments and then griping over the amount of time one of them dedicated to work, but getting benefit of the car when they went to track. I guess similar problems would appear in your scheme, but like you I have often wondered whether it could be possible between friends.
As a member of the classic car club in London, I think sharing ownership risk and cost is a very good idea, the only issue with the CCC is you have no equity in the scheme so isn't really a club in its own right. Of course you are paying for someone else to do all the admin etc which suits me very well.
So find some willing members and be a pioneer! Not sure if someone mentioned it already but it would be a pain if someone wanted out at short notice and liquidate his position. But I guess that could be dealt with in the T's and C's of the agreement.
I seem to remember reading a blog about three chaps who part shared a 944 as a track day car so low costs etc. I think the initial excitment took pain to other commitments and then griping over the amount of time one of them dedicated to work, but getting benefit of the car when they went to track. I guess similar problems would appear in your scheme, but like you I have often wondered whether it could be possible between friends.
As a member of the classic car club in London, I think sharing ownership risk and cost is a very good idea, the only issue with the CCC is you have no equity in the scheme so isn't really a club in its own right. Of course you are paying for someone else to do all the admin etc which suits me very well.
So find some willing members and be a pioneer! Not sure if someone mentioned it already but it would be a pain if someone wanted out at short notice and liquidate his position. But I guess that could be dealt with in the T's and C's of the agreement.
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