So, you want a classic car and you’re wondering how you can finance it. The problem you’ll run into is that most car loan companies have restrictions on how old a car can be. Classic cars have many variables that need to be considered when determining their value and, as a result, many lenders opt-out.
But, before thinking your dream is up a creek without a paddle, here are five financing options you do have and stories from real people who have used them.
1) Personal loan
A personal loan is an unsecured loan, and approval depends on your credit. You can get one from a variety of places, including your bank, credit union, online marketplaces, or direct online lenders. Tom Womack is a classic car owner who took this approach.
He says, “I used to own a 1966 Ford Mustang Fastback. I bought it in 2004 from a dealership in the Dallas area that specializes in classic cars. My initial financing was a personal loan through my credit union (it didn’t qualify for a used car loan due to the age of the car). I think my loan rate was around 6% at the time. I went into the dealership pre-financed and basically paid cash for my ride.”
He adds, “A year later I refinanced the loan using a personal loan from my mother at 2% interest. That was lower than a normal loan rate but much higher than the 0.5% interest she was getting for her savings.”
While credit unions and banks may first come to mind when thinking of personal loans, online lenders have become increasingly popular over the past five years. Instead of walking into your bank or credit union, pleading your case, and taking the interest rate they offer because you have no other option, you can shop around with the dozens of online lenders and compare loan offers.
They’re competing for your business instead of you asking for their help. Find out what you qualify for with a number of online lenders, without hurting your credit score, by clicking here and using Supermoney’s loan prequalification tool.
2) Home equity
If you own a home, tapping into your home equity is another option. This will be particularly attractive if you don’t have great credit and you’re having a hard time getting approved for a good interest rate. Additionally, if the classic car you want still needs to be restored, this route won’t put any restrictions on which car you can buy.
There are a few ways you can go, which include getting a home equity loan, a home equity line of credit, or a cash-out refinance. The amount you can get will be a percentage of the difference between how much your house appraises for and how much you owe.
The loan-to-value (LTV) ratio is often set around 85%. For example, if your house appraises for $350,000 and you owe $275,000, the difference would be $75,000. With an 85% LTV, you could take out $63,750.
The pros of this option are that you can get lower interest rates than with unsecured loans and you can use the money for whatever you want, without restrictions. The cons are that there are typically closing costs for loans or refinancing, and, if you default on the payment, the lender can foreclose on your house.
If you’d like to explore this option, you can review and compare home equity lenders here.
3) Lenders who specialize in classic cars
Now, while many auto loan companies provide loans on new and used cars from the last 10 years, there are some who specialize in classic cars. They are fewer and further between than regular auto loan companies, but they do exist!
David Kosmayer is another classic car owner who says, “After my local bank was not interested in financing a classic car (a 67 Ford Mustang Fastback), I came across Hagerty Company. They have been financing classic cars for many years, and are generally regarded as the premier classic car lenders in the industry.”
He added, “They immediately understood the valuing of a classic car is much different than the valuing of an ordinary car. In short, they made the process easy at a reasonable rate.”
LightStream is another popular option. As Kosmayer points out, these companies know and love classic cars, and will be able to offer you financing based on the fair market value.
I realized the car was rare due to the instrumentation package it had. When I gave the car to my son, I found out it was one of 100 made with an L79 package that was available on various 1966 Chevrolet models. The El Caminos were among the rarest making a $3,500 purchase worth about $135,000 fully restored!
The catch is approval will depend on your credit, so it will need to be in decent shape. Additionally, they may have restrictions on which classic cars they will finance.
4) Credit card
Credit cards are another option. Scott Deuty, the owner of Mini Monster Truck, has purchased two classic cars using credit, and one was with a credit card. He says, “I bought a 1966 El Camino off eBay with a credit card.” His purchase turned into quite a lucrative investment.
“I realized the car was rare due to the instrumentation package it had. When I gave the car to my son, I found out it was one of 100 made with an L79 package that was available on various 1966 Chevrolet models. The El Caminos were among the rarest making a $3,500 purchase worth about $135,000 fully restored!” says Deuty.
This option may not work for higher-priced classic cars that are already restored, due to limitations with the amount of credit you have available. Additionally, credit cards typically have higher interest rates than personal loans or home equity loans, and carrying a high balance on a card can hurt your credit score.
However, this can be beneficial if you want to restore a car yourself because there are no restrictions on what you can buy with your credit card (aside from credit limits). Look into opening a credit card with an interest-free introductory period.
5) Business loan
Lastly, if you’re going to use your classic car for your business, you could consider a business loan. This won’t work for everyone, of course, but it can be helpful under the right circumstances.
Deuty says, “(After buying his El Camino) I then went to a storage unit sale and found a 1971 Scout 800B with a 304 V8 and T-18 four-speed. Because Scout went to the Scout II in 1971, this was a rare half year model that signified the end of the original body style. I bid $550 on the Scout and financed it through my business. It’s worth somewhere around $15,000, and I use it for my towing my kiddie ride of a monster truck that pulls a barrel train ride.”
One thing is for sure, Deuty seems to have a knack for finding good deals. If you want a classic car and its use will be business-related, check out these business loan lenders.
FAQ on Classic Car Financing
Does Capital One Finance classic cars?
Capital One Auto Finance only finances new and used cars, light trucks, minivans and SUVs that will be used for personal use. Vehicles must be 7 years old or newer and have an established resale value.
What is considered a classic car?
The Antique Automobile Club of America itself founded in 1935, defines classic automobiles as vehicles that are older than 25 years old. A car that is 50 years old or older is officially an “antique,” and most clubs and organizations make the distinction between classic, antique and vintage automobiles.
How old of a car will a bank finance?
Typically, a bank won’t finance any vehicle older than 10 years, even if you have stellar credit. If you don’t have great credit, you may find it difficult to finance through a bank, even for a new car. But, banks are far from the last option when it comes to auto lending.
Do classic cars need an inspection?
Classic vehicles are subject to an annual vehicle safety inspection. Antique vehicles operated exclusively between sunrise and sunset are exempt from the normal lighting requirements of the Pennsylvania Vehicle Code, but must have their original lighting equipment.
Get the classic car of your dreams
Don’t get discouraged by auto loan companies telling you no. Your dream of owning a classic car is very possible. Whether you want to purchase one fully restored, or fix one up yourself, you have options. Ready to start shopping for lenders?
Jessica Walrack is a personal finance writer at SuperMoney, The Simple Dollar, Interest.com, Commonbond, Bankrate, NextAdvisor, Guardian, Personalloans.org and many others. She specializes in taking personal finance topics like loans, credit cards, and budgeting, and making them accessible and fun.