Imagine yourself joyriding in a classic beauty like the 69′ Ford Boss 429 Mustang or 69′ Chevrolet Camaro ZL1. For many of us, owning a classic car is the ultimate dream. But a quick look on Hemmings, the largest collector car marketplace, shows that these vintage beauties don’t come cheap.
The price of a 1969 Mustang ranges from $7,500 to $485,000, with the average cost being $68,553. A ’69 Camaro can set you back up to $750,000. If you don’t have the cash on hand, you’ll probably turn to financing to buy your dream car. But classic car loans operate under different rules than standard auto loans.
Ready to make your dream a reality? Here’s what you need to know.
Not all auto loan lenders offer classic car loans
Let’s step into the shoes of an auto lender. When evaluating a loan application, lenders examine a borrower’s credibility (their likelihood to repay the loan in full), as well as the potential loss if the borrower defaults. Many lenders control the risk by setting age requirements on the cars they will finance. For example, some lenders don’t provide loans for cars more than 10 years old. Classic cars challenge to these standards: they are old, but their age makes them worth more, not less. Many are somewhat run down, but could be worth a fortune with a little work. In short, the value of a classic car can be hard to determine. This makes it hard for lenders to weigh their risk.
Because classic cars tend to be very expensive, they necessitate large loans. If the borrower defaults, the lender will have to sell the car for a price that covers the loan. But the resale value of classic cars is inconsistent. To mitigate this, classic car lenders often require larger-than-average down payments — often 10-20%.
Even with a bigger down payment, classic car loans are still high risk. They require the lender to possess specialized knowledge of classic cars and their value. Due to these complications, you should seek out lenders that specifically offer classic car loans to get approved.
Lenders that finance classic cars
Lightstream. This online consumer loan division of the Sun Trust Bank provides unsecured auto loans. They offer classic car loans, declaring that they’ll facilitate the purchase of “any collector car from any seller.” And Lightstream loan approval is not limited by make, model, year, mileage, or loan-to-value. You can apply online to find out what rates you qualify for. Once approved, you can have the money in your account in as little as one day.
JJ Best Banc & Co.: This finance company is dedicated to helping classic car enthusiasts’ dreams come true. JJ Best Banc & Co has spent several decades financing classic cars, and will approve most models from 1900 forward. You can apply online, by paper mail, by email, or over the phone.
Another loan option
If you don’t want to take out a classic car loan (or your application is rejected), consider financing your purchase with a home equity loan. Home equity loans are secured by the equity in your home, and as such, are easy to get approved. Home equity loans typically feature long loan terms, giving you 15-30 years to pay off your debt. They also have lower-than-average interest rates, though you’ll have to pay high closing costs and fees at the end of the loan’s lifespan. However, you shoudl only go this route if you’re sure you can pay off your debt. If you fail to do so, you could lose your home.
Interested in taking this route? Compare home equity lenders to find the right loan for you.
Whether you’re financing your vehicle with a classic car loan, a home equity loan, or a personal loan, here are some things you should consider:
Credit is key
Once you find a lender, getting your credit in good shape will improve your odds of getting approved and getting a low interest rate. Jake Rheude, a classic car connoisseur, says his high credit score made financing a ’64 Corvette convertible easy. If your credit is poor or fair, consider a secured loan or a home equity loan instead of a classic car loan.
How you use the car matters
Another factor in getting approved for a classic car loan is how you plan to use the car. If it will be your primary mode of transportation, that increases wear and tear on the vehicle, which lowers the car’s value. This increases the risk to the lender and may decrease your chances of getting approved. On the other hand, if the classic car will be for special occasions only, lenders will look more favorably on your request.
Longer loan terms are available
Because classic car loans are often larger than regular car loans, longer repayment periods may be available from lenders to help reduce the monthly impact on your wallet. Rheude says, “I’ve spoken with a credit company that offers 96-month loans for purchases between $25k-$50k, 120-month terms for $50k-99k and 144-month terms for a purchase over $100k.”
Of course, if your loan is for a longer period, you’ll end up paying more in the long run. Olmsted adds, “Classic car loans may run 10 years or more as opposed to three to seven years for your average car. This means you’re paying much more for your car as the interest piles up.”
So while longer loan periods mean more affordable monthly payments, always seek out the shortest loan term that you can reasonably afford.
There are lenders that will finance classic cars, if you’re willing to look for them. Not all auto loan lenders will consider them. Furthermore, classic car loans are riskier than most. As such, it’s essential that you have a good credit score and the willingness to make a high down payment. Approval varies depending on the car you choose and how you plan to use it.
While getting a loan for your classic car may be trickier than getting a loan for a new or used car, it is possible. Ready to get started? Click here to get pre-approved offers from leading lenders. You can see what rates you qualify for, pick the best offer, and be driving your dream car in no time. Or if you want to do more research first, compare auto lender reviews here.