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Wilson's Auto Restoration Blog

How to Get Financing for a Classic Car or Truck

Have you ever dreamed of owning a classic car, but wonder how long it would take to save enough money?   Do you think that owning a classic car or truck is only for the lucky few with disposable?  You are not alone!  For years there has been a stigma on classic, antique and vintage car collecting being a cash only hobby and for a long time, it was true.  Well, times have changed.

Financing your classic car is now a realistic option to turn your dream into a reality.   Normal lenders like general banking and lending institutions still won’t approve a loan for a car that is potentially 20-70 years old.  They have no way of truly gauging the value of the car after it has spent years depreciating.  That is where specialty lenders step in.

A few of the largest lending companies that make classic car loans are J.J. Best Banc & Company, Haggerty Company  and Woodside Credit. With a good credit rating and a down payment (typically 10-30%), these companies can help you get the funding you need.  Specialty lending companies also offer longer terms than a traditional car loan of 5-7 years.  Some of the loan terms can go as long as 10-12 years, although you can expect to pay a higher interest rate the longer the loan period.  Interest rates are generally between 5-10% and higher depending on your financial situation. Companies like the three named above are equipped with the ability to understand the value of a classic car and the risk they are taking by creating a lien for it.

There are other requirements for the purchaser other than a good credit score and a down payment.  The car must be titled and insured in the owner’s name to help protect the lender and the owner, as well as discourage speculators from using financing as a means to fund their speculation schemes.  There are also situations where a classic car may not qualify for a loan.  If everyone in your household has a car and your new vintage ride will only be used as a hobby car then you stand a good chance of qualifying.  If on the other hand you are trying to get a 1955 Thunderbird as a daily driver then chances are you will be denied.  Lastly, if you are trying to get a loan for an entire restoration project you can pretty much forget it.  You will be hard pressed to find anyone to loan you money on a piece of collateral that is not yet worth the money.  Many of these specialty lenders will actually send out representatives to verify that the VIN numbers match, take photos of the collateral and possibly make sure the car runs depending on the terms of the loan.

In addition to standard loans and lines of credit, some buyers choose to use a home equity loan to purchase their collector cars and trucks.  This financing usually offers better interest rates, but you should proceed with caution.  Ask yourself “Should this line of credit be used to make home improvements like a new kitchen that will add value to your home?”  If this is a concern of yours, you might be better off going with the specialty car loan.

Before committing yourself to a long term monthly payment we suggest you take the following steps:

  1. Determine your budget. Figure out how much you can afford to put towards a hobby each month for the next 5 years or so.
  2. Research the vehicle you want to own. The more you know about the value of the car and its possible value in the future, the better position you will be at negotiating your loan terms.
  3. Search for lenders. Find out which lenders are willing to offer the loan that will accept the car in question and will fit your budget.
  4. Find your dream car or at least the car you would like to purchase. If you already know exactly what car you would like that is great.  Now that you know which car you want you will easily be able to get all the information pertaining to that car for the loan application.
  5. Don’t apply to too many lenders. Too many applications can actually harm your credit rating.
  6. Get an inspection on the car. If you are not 100% positive on the value or condition of a vehicle, get it inspected.  You might find out it isn’t worth what you thought it was.  This can be a positive or a negative discovery.  You might find out that you stumbled upon a real find and that it is worth much more than the asking price or maybe it is a jalopy that is worth much less.
  7. If you have excellent credit, you may tell a prospective lender that you are shopping around for the best rates. This can sometimes convince a lender to give you a lower rate to get your business.  A word of caution though as this tactic has been known to backfire.

Regardless of the route you take to secure financing for your classic car, it is a good feeling to know that there are companies out there that are willing to take the risk to help the average person achieve their dream of being an owner.

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