Classic Car Financing and Loans

Classic Car Financing is a little more involved than simply walking into a dealership, picking out the car you want, and signing your name a half dozen times!  Even though buying a classic car can be a MUCH better financial decision than buying a new vehicle, most conventional finance companies will not make classic car loans.

To qualify for a payday loan for self employed, you will probably need a co-signer. This person will be responsible for paying off the loan if you fail to make your payments. This can be a family member or friend. Sometimes there is a requirement for you to have been employed at the same job for at least a year.

When you first start to think about that, it doesn’t seem to make much sense. After all, a finance company will gladly provide a loan for a late model used vehicle that is depreciating at a steady rate, or even worse a new vehicle that will depreciate sharply in value as soon as you drive it home. But if you ask them about a classic car loan, they look at you like you have two heads.

Classic cars generally hold their value very well, and will appreciate over time. That seems like a much safer loan to make, since if the borrower defaults on the loan, then the collectible vehicle should be worth at least (if not more than) what it was worth when the loan was made.

The biggest reason most traditional lenders will not provide classic car financing is that it is difficult to place an accurate and reliable value on an antique or collector vehicle.  A new or late-model used vehicle is much easier, because they can look up a “book value” from a number of different sources and come up with a reliable estimate of a vehicle’s market value.  With late model vehicles, there are enough of them being bought and sold across the country that companies like Kelley Blue Book and Edmunds have a lot of data points to compare, and they can publish somewhat accurate guides on what a late-model vehicle is worth.

Unfortunately, that is not the case with collector or antique cars.  With a 1948 Packard Custom Eight Victoria show car, there just aren’t a lot of data points to compare to.  With almost any late model used vehicle, there will be one almost just like it down the road somewhere for sale.  Late model car buyers have many very similar options to choose from, and that helps keep prices from varying greatly on a particular late model used vehicle.

With antique cars, it may be difficult or impossible to find a similar example that has sold recently, at least in great enough numbers to come up with a “book value” that a lender can look at.  A lot can also happen to a vehicle in 25, 50, or 75 years, and the categories that KBB and Edmunds use cannot really be applied to a classic car.  There are too many variables.

To start with, is the collector vehicle all original or has it been restored?  If it is a rare model, an unrestored example may be worth more than a perfectly restored vehicle.  If it has been “restored”, did the restoration consist of a cheap paint job over top of shoddy body work?  Is it a former rust bucket that is full of body filler?  Or was the restoration done by a professional who took his time and used high quality replacement parts?  The quality of a restoration can greatly affect the value of a collectible vehicle, and a traditional lender doesn’t have the expertise to evaluate this factor for an antique car loan.

Has the car been modified in any way?  A car may be worth more if it has been upgraded with modern suspension or a high-performance engine or transmission, but again, a rare vehicle may be worth more without the upgrades.   A $20,000 custom built engine could make a car worth more than putting in a $5,000 mass produced crate engine, but that $20,000 custom engine may be worth more than the rest of the car!

If you are buying a 1969 Camaro SS, is it really an SS, or is it a clone that somebody added all the SS parts to?  Did the GTO you are looking at actually begin life as a 1965 Tempest, or was it a GTO when it rolled out of the factory?  Does the 1970 Boss Mustang you are buying still have the original engine and quick-ratio steering box, or is it a car that somebody drug out of a field years ago, minus the engine, and installed a mundane 2-barrel 302 out of a 1978 pickup truck?  All these things can greatly affect the car’s value, and a conventional lender that is not experienced in classic car financing will have a hard time analyzing all these points.

Does the car have any historical significance (i.e. did it belong to Elvis, or is it the actual car that Joe Weatherly drove to win the NASCAR Championship at Riverside in 1963)?   Is it unique or rare in any other way?  Is it a fully-optioned model with air conditioning and power everything, or is it a stripped down base model?  Is it a very popular model that is in great demand (for instance, a 1969 Camaro convertible or 1967 Mustang fastback), or is it a more obscure (but rare) model that would be worth a considerable amount of money only to a relatively small group of enthusiasts?

Those are just some of the factors that affect a classic car’s value, and your everyday auto loan company is not equipped to evaluate all those variables.  The bottom line for a lender is, “How easily can we get our money back if the borrower defaults on the loan?”  A lender that does not deal with antique vehicles every day has a hard time answering that question, so they either just don’t offer classic car loans at all or they jack up the interest rate to help cover a possible mistake in valuing the car.

That is why it is best to seek out a lender that specializes in classic car financing, or at least has a classic auto financing program.  They will be familiar with the ins and outs of classic car values and will be able to evaluate all the factors above and how they affect the value of a classic car.  Because they are familiar with antique and collector cars, a specialty lender will be much easier to deal with on an antique car loan than a conventional lender will be, saving you a lot of time and hassle.

A company that specializes in classic auto financing will usually be able to give you a better interest rate than a conventional lender, because they understand the value of your classic car and realize that it is not a depreciating asset like a new or late-model used vehicle is.  Lastly, classic car financing companies may offer much longer terms than a conventional lender (up to twelve years in some cases!), which would lower your monthly payments considerably.

For more information on how a classic car loan is different than a conventional used car loan, take a look at Classic Car Loans. If you are interested in learning about other ways to finance your classic car, go to Classic Car Loan Alternatives.  For a directory of companies that specialize in classic car financing, visit my Classic Car Financing Directory.

If you are considering building a garage to keep your collector car (or cars) in, check out my other website Garage Plans Etc. You will find information on Garage Plans, Garage Building Kits, garage doors, and lots of other interesting stuff. Remember, you need to protect that investment you are getting the classic car financing for!