Classic Car Loan Financing Options

Feb 07, 2019

Want to get into the collector car hobby through financing?

Here are some options to consider, and remember in almost all cases the lender will require an independent current Fair Market Value Appraisal to determine the amount of the loan.

Hobby-Specific Financing

This is a fairly new alternative for someone wishing to buy an antique, classic or collectible vehicle. The loan representatives understand the collector car market – namely, why a 40-year old car might cost upwards of $50,000, or much more! Interest rates tend to be low and loan terms can be generous, keeping monthly payments affordable. See a list of potential loan providers.

PROS: Very low monthly payments, doesn’t tie up cash

CONS: The cost of borrowing money

Personal Loans

Your bank may extend you a personal loan, although amounts are often limited to $5,000. That works well if you’re a little short of the cash needed for a deal. Assuming good credit, you can get a small unsecured loan -- you may pay for the lack of collateral though, with an interest rate that could easily exceed the prime rate.

PROS: Convenient

CONS: High interest, small principle

Home Equity Loans

These loans have grown in popularity because of their low interest rates. Though often tax deductible, you should consult your tax advisor to confirm before going this route. You’ll need to consider the variable interest rate and risk when deciding to put a lien on your home.

PROS: Lower interest rates, often tax deductible

CONS: Variable interest rates, the loss of your home if you default!

Local Banks

A bank might approve your loan, if you’re lucky enough to work with a collector car enthusiast who understands your passion for older cars. And most don’t understand the difference between a collector car and a used car. They will likely offer you a short term loan – usually a max of 36 months – and a high interest rate up to double the cost of a new car loan.

PROS: Convenient location

CONS: High interest rates, possible lack of interest in collector car loans.

Credit Unions

Generally a better bet than banks, with the same comments as above, but the interest rate will usually be more competitive. Advantageous if you are already a member with a savings history.

PROS: Convenient location, lower interest rates

CONS: Possible lack of interest or knowledge in collector car loans

Leasing a Classic Car

Leasing is attractive for its low monthly payment. Some leases are close-ended – that means you know the residual value of the car up front and have the option of returning the car. Other leases are open-ended, meaning the value of the car will be set at the end of the lease and you must then buy the car.

Some leasing programs function like balloon loans, with low payments until the last one, which is larger and requires refinancing or a payoff if you wish to keep the car. See a list of potential lease providers.

PROS: Doesn’t tie up cash low payments

CONS: You don’t own the vehicle and you don’t benefit if it appreciates.

Remember: Protect your investment! Get it appraised!

Tags: All, car appraisal, cars, Collector Cars, Financing

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