Classic Car Financing

Whether you have found a car you want to purchase, or you are about to start your hunt, you will more than likely need financing for that classic car. If you are planning on purchasing a project car that doesn't run, financing may not be needed, but for most it will be required. Financing that new classic is not as hard as it may seem, even with the current economic turmoil.

Specialty Car Loan Lenders

Many make the mistake of getting financing through a general lender instead of a specialty classic car lender. Lenders who specialize with classic cars and other collectible cars can make your loan approval a lot easier and quicker. Unlike your local bank or other lender, specialty car lenders know what they need to approve your loan quickly. Any lender will want proof of the actual value of the car you are purchasing, and most require an inspection. The specialty lenders will help you through this process quickly.

Interest rates and longer loan terms can also be found through specialty car lenders. Standard auto loans are 3 to 5 years, but specialty lenders can go up to 10-12 years, depending on the amount being borrowed. The longer the loan term is, the higher the interest rate will be, but this does give the consumer more options. Interest rates are sometimes lower with specialty lenders, since they understand the true value of the car you are purchasing. As with any other loan, your interest rate is based on your credit score. The better your credit score is, the better financing rates you will have. You may want to look at your credit score before starting the loan approval process. If your credit is below 600, you will have a hard time getting a loan. Between 600 and 700 is ok, but your interest rates may be higher. Anything above 700 is great, and you should have no problems.

Most lenders will pre approve your loan, so you don’t have to find your car first. You will probably have a set amount of time to find your car, probably 30 to 60 days before you will have to reapply for the loan. Many online searchers use ebay and craigslist. You probably already know what car you want or how to get it, so we won’t go into much detail on that.

Determining your car loan amount

Remember, buying your collector car is not the same as buying your day to day driving car from the dealer up the road. Most lenders will require a specialty inspection to prove the value of the car. This will probably be a few hundred dollars, and sometimes can be rolled into the amount of the loan. There may also be travel and shipping costs, if you are purchasing the car in another area. You may want to travel out there to view the car yourself, and drive it back if it is not too far way. If it’s on the other side of the country, you will need to pay for shipping costs through a shipping company, and these can add up to quite a bit. Make sure you account for this in the loan if you do not want to pay for the costs up front from your own pocket.

Most lenders will also require a 20% down payment for a classic car purchase, and sometimes more for hot rods (hot rods are harder to put a true value on). Sometimes you can get out of this if you have good credit, but not always. Keep this in mind.

When it makes sense NOT to finance a classic car purchase

The answer to this question was different only a few years ago. Over the last 10 to 20 years, collector car values have skyrocketed, sometimes 10 to 20% a year. Even if you had the cash to purchase the car, it made economical sense to borrow the money at 6% to 8% for the purchase, while your new car value grew at a higher rate. All that has changed over the last 12 to 18 months.

The current pattern of values is short to look at, but there are a few patterns emerging. Collector cars with true documentation proving that they are authentic models, especially rarer collectibles, have seen their value stay constant or rise just a little bit, but not at the 10 to 20% rate. Replica models or clones as they are referred to in the collector market, have seen a sharper decrease in value. There are no true percentages to throw out there, but this is the short term trend the market has been showing. If you have the cash to purchase your classic car outright, you will want to weigh the options carefully. I won’t pretend to tell you what the market will be like in the future.

Refinancing your home to purchase your classic car

It’s not a great idea. I have heard people do this, but you have to ask yourself why you would risk the home you live in, which is more than likely well above the value of your collector car? Remember, you are putting your house at risk if you are unable to pay that extra loan. Again, due to the economic uncertainty and the value of homes plummeting, this is probably not an option for most people now.

In conclusion, selecting a specialty classic car lender will more than likely speed up the process of securing your loan, and the overall process should be easier. Less stress and time with the loan process will help make that new classic car purchase that much more enjoyable!

Dan F is a small time classic car blogger. You can visit his site to find classic cars for sale, and find more financing information at classic car financing.