Investing in Car Fleets with a Self-Directed IRA

Published on November 12, 2025

Investors with self-directed IRAs (SDIRAs) can use their interest in vehicles to invest in cars or trucks to create a fleet that can be leased to a third party. Similar to equipment leasing, this creates passive rental income for the SDIRA.

When using a SDIRA to invest in a car fleet, it is important to know and understand the IRS rules to avoid making prohibited transactions and investments in collectibles.

• Investing in cars or any kind is generally a no-no because the IRS considers automobiles collectibles. This constitutes a prohibited transaction because the IRS prohibits investments in collectibles with a self-directed retirement account.
• Investors are also prohibited from using the IRA to purchase assets that they or other disqualified persons would use personally. The asset must be solely for the benefit of the self-directed IRA, not for the account owner or spouse, parents, children, or entities that the account owner controls.

However, there are ways to invest in car fleets with a self-directed IRA to diversify one’s retirement portfolio and stay on the right side of the IRS. This is done by purchasing vehicles as inventory to lease or sell to a car service or trucking company, or investing in a fleet company or certain funds.

Investing in vehicles and fleet services

To keep the investment within IRS investing guidelines, the vehicles must be treated as inventory or business equipment that will be sold or leased. The SDIRA may also invest in car fleet companies. Here are some ways to make these transactions.

• The SDIRA is a passive investor in an unrelated, third-party vehicle fleet company or equipment/auto leasing fund. In this scenario, the retirement account purchases an equity stake or provides a loan, with terms worked out between the investor and company owner.

The SDIRA may set up an LLC or limited partnership to invest in the unrelated company that runs the car fleet or trucking business. The retirement account is the sole investor in the entity (the LLC or LP), since the investor may not engage in self-dealing by having a personal ownership stake or any management role.

• The self-directed IRA purchases vehicles that are then leased, for business operations, to a car service or similar operation. This can help the third-party business owner start a company or expand operations without significant upfront outlay of corporate funds—and generates passive income for the IRA. The vehicles are considered business inventory, avoiding the IRS prohibition of collectibles.
• The IRA invests in a private limo or cab service, airport shuttle company, or tow truck company.

As with all self-directed investments, the IRA custodian executes these transactions on behalf of the account. All revenues associated with the assets flow into the SDIRA and all expenses are paid out of IRA funds. Income is derived from the resale or leasing arrangement, repayment of a loan with interest, or profits from a fund in which the account is invested.

NOTE: Prepare for Unrelated Business Income Tax (UBIT). When a SDIRA invests in an active trade or business, such as an operating car fleet, the income that is generated may be subject to unrelated business income tax (UBIT). We recommend that our clients who are considering investing in vehicle fleets consult a trusted advisor and discuss strategies for managing this tax liability.

Other ways to make vehicle-related investments with a self-directed IRA

The automotive industry provides many other ways investors can participate through a self-directed IRA.

Investors can make unsecured or secured loans with funds from their SDIRA to local auto dealerships, auto body shops and repair services, mobile services such as car wash, oil change and windshield repair, tire shops and auto parts stores, car washes and car detailing companies, vehicle rental companies, and classic car restoration businesses. The IRA can also be an angel investor in a startup or early-stage company or help someone purchase a vehicle-related franchise business.

Technology has created emerging and specialty businesses related to vehicles. These include fleet management technology developers and providers, electric vehicle charging stations (development and maintenance), and specialty garages for luxury vehicles.

As always, our team is here to answer your questions and provide guidance on all aspects of self-directed investing. You can reach us at NewAccounts@NextGenerationTrust.com or 888.857.8058.