Found the car of your dreams and ready to buy? Here’s how to finance it.
Even if you have savings in the bank, it might not be enough to snag the car of your dreams. Classic car loans can help out if you don’t have the full amount available when you’re ready to make the purchase.
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What to know about classic car loans
You’ve had your eye on a buying a classic car for years now. You’ve built up your savings while browsing your options at car shows and auction houses.
Like all car loans, your eligibility depends on your credit and finances, with most lenders expecting 10% to 30% down payment. The more you can spend upfront, the lower your interest rate will be. At the end of your loan term, you own your car and are able to sell it or keep it as a valuable asset. This gives you the freedom to do whatever you like to the vehicle, from painting to installing different features.
Classic car loans share many of features of standard car loans, but they do have some unique characteristics that set them apart.
- Stricter credit requirements. Many classic car loan providers only accept customers with a good or excellent credit score. Good credit lower your risk, usually resulting in lower rates.
- No vehicle age restrictions. Typical car loans often require that you car be no older five years old. Classic cars are far older but are high-value purchases so the age restriction is more relaxed.
- Restrictions on vehicles. Classic car loans can often be used to buy unique, muscle or other exotic cars, while everyday car loans are usually limited to modern vehicles.
- Expert valuations. There may not be any established guidelines for valuing a specific classic car. Classic car loan providers will often have experts who can establish the car’s value.
Many borrowers turn to personal loans to for classic car financing since the requirements tend to be easier to meet.
Compare a range of classic car financing options
How to value a classic car
In order to accommodate the wide variation of car values, classic car loans can be flexible in the amounts you can borrow. Depending on its condition, rarity, originality, collector appeal and many other factors, a classic car could cost as much as a few hundred thousand dollars.
There are guides to valuation, but often it requires an expert with some in-depth knowledge of the market. A specialized lender may have a classic car specialist on hand, or you can contact one yourself and have the car appraised before applying for a loan.
What to look for in a classic car loan
There’s more to a loan than just the interest rate. You should also look at:
- Fees. Fees add to the total cost of your loan. Many lenders charge multiple fees, but there are some that are negotiable or vary from lender to lender. Find a lender that has minimal fees so you can walk away with a better deal.
- Repayment terms. Some loans last 24 months while others can stretch as long as 144 months. The longer your loan term, the lower your monthly payment but the more you’ll end up paying in the end. Weigh the pros and cons of various repayment terms when comparing your loan options.
- Flexibility. Can you make additional repayments? Are there any early repayment fees? The flexibility of a loan can make a difference in your ultimate choice of lender.
- Security. Lenders often require you to use your car as the security for your loan, and a classic car loan is no different. By using your car as collateral, you’ll have access to lower interest rates, but you do risk losing the car entirely should you default.
Consider any insurance requirements that might come with your car loan. Many car loans will, as a condition of your borrowing, require you to take out comprehensive coverage.
In addition, the value of your classic car may increase the premium you pay. Classic car insurance policies can include benefits such as lay-up periods to reduce premiums, which may be more suitable if you’re a collector or looking to invest in the classic car as an appreciating asset.
High-value classic carsA large variety of classic cars on the market have buyers lining up to make a purchase, but here are a few that auto enthusiasts put at the top.
- Chevrolet Camaro
- Dodge Charger
- Ford Torino
- Plymouth Roadrunner
- Chevrolet Chevelle
These classics may cost you more, but could be worth the investment if you love driving or working on classic cars that can last you years to come.
What are my other loan options?
Some lenders have a specific product for financing the purchase of a classic car, but these aren’t your only options. If you aren’t eligible for a classic car loan, or the terms aren’t right for you, you might also consider:
- A personal loan. An unsecured personal loan might carry higher interest rates than other alternatives and may not be enough to finance your full purchase, but combined with your savings, you’ll could purchase your dream car sooner.
- Home equity loan. Some classic car enthusiasts choose to take out a home equity loan to finance their dream car. If your house has enough equity, a home equity loan could cover the cost, but if you default, you risk loosing your home.
- A standard car loan. Standard car loans aren’t usually available for classic cars, but you might be able to find a few local lenders willing to offer one if they understand the value of your purchase.
A classic car can be considered an investment. Many appreciate in value when taken care of and stored properly, and each one is a unique collector’s item. Review your finances before borrowing a loan for a classic car. Review the costs and features to make sure it suits your needs and budget, and don’t hesitate to speak with an accountant before finalizing a purchase.