Classic Car Loans
Classic Car Loans from a specialty lender can usually save you a great deal of time, money and hassle when compared to trying to finance a classic car through a bank or other mainstream lender. If you are buying a classic or exotic car, a traditional car loan is normally not going to be the best choice for you. Most lenders are set up to make loans for late model “normal” cars that depreciate quickly, but are easy to determine a value for. These loans have relatively short terms, may require little to no down payment, and the interest rate depends greatly on the buyer’s credit score.
Classic car loans differ from traditional new or used car loans in several ways. First of all, a 10-30% down payment is usually required, unlike new car loans that can commonly be obtained with “zero down” with good credit. Also, a credit score of less than 700 will usually disqualify you for a classic car loan, as will a recent bankruptcy in most cases.
However, many lenders will make a classic car loan for a much longer term, up to ten or even twelve years (try finding THAT with a new car!). Of course, the interest rate increases as the term gets longer. Most “normal” used car loans only have a three to five year term.
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Classic car loans will often require an expert appraisal. An appraisal can cost several hundred dollars, and that cost has to be taken into account when you are thinking about classic car financing. A good appraisal will of course go into detail about the condition of the car, but also include information about the history of the car (any wrecks or previous body damage that has been repaired or any historical significance of the car) and the authenticity of the car (is it REALLY a GTO, or a Tempest that someone has “converted” into a GTO clone by adding emblems and swapping engines?). Some lenders may require that the car be inspected or appraised by a particular company; if so, then consider having the same company do your appraisal to keep from paying for two of them. Even if it is not required for financing, it may be a good idea for insurance purposes to have an expert appraisal done. Take a look at American Classic Car Insurance for more information on classic car insurance.
Classic car loans take the current and often the expected future value of the car into account. Very few late-model cars will appreciate over the term of the loan, but it is common (or even assumed, in many cases) for a classic car to appreciate before the loan is paid off. Assuming that the car is not damaged and is authentic, a classic car should hold its value very well, especially in comparison to almost any late model car.
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Another thing to keep in mind when you are looking at financing a classic car is the potential transportation costs. If the car you want is not local to you, it may be prudent to have the car shipped to you (do you really want to drive your new-to-you collector car across the country?). If you are going to incur shipping costs to get the car home, you will want to consider those costs when deciding how much money to borrow.
You don’t have to wait until you have a particular car picked out to get financing lined up. If you are going to be attending a classic car auction, you may want to go ahead and get pre-approved for a classic car loan so that you have a line of credit already set up, instead of scrambling around to find financing after committing to purchase a car. Most lenders that offer this service will have a set time period of 30-90 days for you to find a car, and if that time period expires you will have to re-apply.
Some classic car financing companies will charge application fees and/or origination fees that you don’t usually see with a typical car loan. Make sure that you understand the terms of the loan and are aware of any fees that might be incurred. Ask if there is any pre-payment penalty, if the loan has a fixed or variable interest rate, etc.
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The last thing to consider (or should it be the first thing?) is “Can the current owner of the car provide a clear title? ”. Some states do not issue a title for older cars. That may make it difficult to get a classic car loan. If the car you are looking at does not come with a title, check with your lender to see if that is acceptable or not.
Those are the main differences between classic car loans and your typical new or used car loan. Make sure you read the fine print and discuss all these points with your classic car loan company so that you know exactly what you are getting before you sign on the dotted line. If you are financing a classic car, then a specialty lender will most always be the best choice.
For a listing of companies that specialize in classic car loans, visit my Classic Car Financing Directory.