How to finance a classic car purchase? Explore loan options, leasing, personal financing, and tips to make owning your dream car a reality.
Introduction
A common question when it comes to buying a classic car is how do you finance a classic car? And the answer is that classic car financing can come from classic car loans offered by specialty lenders, personal loans, home equity loans or even by using investment assets. Each approach has its pros and cons and the best method for you will depend on your credit score, budget and whether you are purchasing from a dealer or private party.
Understanding Classic Car Financing
The financing of a classic car is not much alike the purchase of a typical new or used car. Traditionally classic cars are not only old but often are increases in value so a conventional loan may not be the way to go. These vehicles are deemed risky or do not fall into their standard underwriting guidelines by most banks and credit unions. That is where specific classic car lenders can help. Organizations like Light Stream, Woodside Credit, J.J. Best Banc and Co. or even Collector Car Lending can provide specialized financing options for classic, collector or antique automobiles.
Top Financing Options for Classic Cars
Classic Car Loans
If you want a loan that is built for a purpose these are probably your best bet. Lenders consider the cars value year and condition when they grant a loan. Terms are generally longer they can run up to 10-12 years to keep payments low and interest rates vary from 5% to 10% depending on your credit.
Personal Loans
A personal loan provides you a lot of flexibility you can purchase from any seller and have extra funds for restoration or shipping. Alas, loan interest rates are steep 8% -15% and repayment periods short 3-7 years. You’ll need good to excellent credit for favorable terms.
Home equity loan or line of credit
If you own a home, a home equity loan or HELOC allows you to borrow against your home’s value usually at a lower interest rate than a personal loan. While those options might be perfect for such high ticket classics the downside is you risk losing your home if you ca not pay.
Leverage Investments or Cash Out Refinancing
And some collectors took out margin loans on their investment accounts or refinanced other assets to unlock cash. This strategy does require a good amount of financial planning but it can be less expensive in terms of interest rate and taxes depending on how you do it.
Cash or Terms with Private Individuals
If you are purchasing from a private party you might also be able to discuss direct installment payments especially when the seller is motivated. This circumvents banks entirely but the necessity of a good agreement and mutual trust.
Factors That Affect Your Loan Approval
Credit Score: You can access the best interest rates if your score is 700 or higher. Some niche lenders will accept lower scores with correspondingly high down payments.
Down Payment: Plan on putting down 10%–30% or more. Larger down payments for high value classics will help alleviate lender risk and monthly payments.
Appraisal and Inspection: Most lenders will need a totally independent appraisal to ensure the car’s value. Some may also require a pre purchase inspection report.
Insurance: You will have to get classic car insurance which is typically cheaper than regular auto insurance but may come with mileage and storage requirements.
Conclusion
Obtaining financing for a classic car is a bit more involved than securing a loan for a typical vehicle but with the right preparation it is certainly possible. Whether you are after a concurs ready masterpiece or just a labor of love keeper knowing your options for financing will mean your purchase is not just a fantasy but a savvy investment.
