Ever go to a car show and wonder how long it would take to save enough money to own a classic car? Financing your classic car is now a realistic option to turn your dream into a reality. Unfortunately, traditional lenders like general banking and lending institutions still won’t approve a loan for a car that is 20-70 years old because they have no way of genuinely gauging the car’s value. That is where specialty lenders step in.
Options for vintage car financing
Hagerty doesn’t offer vintage car financing, but they provide a thorough list of classic car financing options. You can get a free quote online, and you can compare the pros and cons of each of the lending options. 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 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. Finance companies that offer classic car loans 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 besides 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. There are also situations where a classic car may not qualify for a loan. However, if everyone in your household has a car and you will use your new vintage ride as a hobby car, you stand a good chance of qualifying.
On the other hand, the bank will deny your application if you are trying to get a 1955 Thunderbird as a daily driver.
Lastly, if you are trying to get a loan for an entire restoration project, you can forget it. You will be hard-pressed to find someone to loan you money on a piece of collateral that still needs to be worth the money. Many of these specialty lenders will send out representatives to verify that the VINs match, take photos of the collateral, and possibly make sure the car runs, depending on the loan terms.
Pros of Classic Car Financing
The main advantage of financing a classic car is that it tends to appreciate over time, making it a good investment. Additionally, lenders may offer lower interest rates on classic car loans because they know the car will likely increase in value.
Another benefit of classic car financing is that you can often get a longer loan term. As a result, the monthly payments will be lower, and you won’t have to worry about paying off the loan quickly. Additionally, many lenders offer flexible repayment options so that you can tailor your loan to your specific needs.
Finally, financing a classic car can be a great way to start a collection. Many classic car collectors finance their vehicles, allowing them to build their collections slowly over time.
Cons of Classic Car Financing
Before you decide to finance a classic car, consider the potential drawbacks. The first is that classic cars are more expensive than modern ones, so you may need to take out a larger loan to finance your purchase. Additionally, classic cars require more maintenance than regular cars, so you must factor in these additional costs.
Another potential drawback is that lenders may need to be more selective regarding classic car financing. You’ll need a good credit score and a solid income to qualify for a loan. Additionally, lenders may charge higher interest rates on classic car loans.
Finally, classic cars are often more difficult to insure than regular ones, so you may need to shop for the best coverage. You may end up paying more for your insurance.
Understanding Classic Car Loans
Before applying for a classic car loan, one must understand the different types available. The most common type of classic car loan is a secured loan. The value of the car secures the loan. The lender can repossess the vehicle if you fail to make your payments.
Another type of loan is an unsecured loan, which means the value of the car is not what secures the loan. However, unsecured loans tend to have higher interest rates than secured loans. Additionally, you’ll need an excellent credit score to qualify for an unsecured loan.
Finally, you can get a loan from a private lender. Private lenders tend to be more flexible than banks but may charge higher interest rates.
How to Get a Classic Car Loan
The first step is to determine how much you can afford to borrow. Knowing your budget will help you narrow down your options and ensure that you don’t take out a loan that exceeds your budget.
Next, shop around for the best loan. Compare different lenders and compare interest rates, loan terms, and repayment options. Additionally, make sure to read the fine print and understand all the terms and conditions of the loan.
Finally, ensure that you have all the necessary documents ready before you apply for the loan. For example, you’ll need proof of income, address, and a copy of your credit report. Most lenders will require these documents before they approve your loan.
Before committing yourself to a long-term monthly payment, we suggest you take the following steps:
- Determine your budget. Figure out how much you can afford towards a hobby each month for the next five years.
- Research the vehicle you want to own. The more you know about the car’s value and its possible future value, the better position you will be in negotiating your loan terms.
- 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.
- Find your dream car or the car you want to purchase. If you already know 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 about that car for the loan application.
- Don’t apply to too many lenders. Too many applications can harm your credit rating.
- Get the vehicle inspected. If you are not 100% positive about the value or condition of a car, get a trusted mechanic to inspect it. You might discover it isn’t worth what you thought it was.
Learning the vehicle’s worth can be a positive or a negative discovery. You might discover that you stumbled upon a real find and that it is worth much more than the asking price, or it is a jalopy worth much less.
Final thoughts
Regardless of the route you take to secure financing for your classic car, it is good to know that companies are willing to take the risk to help the average person achieve their dream of being an owner.
Once you have purchased your dream classic car, visit Wilson Auto Repair to discover how we can help you repair and restore your classic American cars and trucks. Our team has worked on more than 68,000 vehicles since 1980. We are here to help you fix up your classic vehicle so you can enjoy driving it again.