Can You Finance Classic Cars? Here’s What to Know

Financing a classic car differs significantly from obtaining a standard car loan. Individuals often seek this funding to acquire a piece of automotive history for enjoyment, investment, or collection expansion. Understanding the specific requirements and avenues for financing can help prospective owners navigate this specialized market.

Eligibility for Classic Car Financing

Qualifying for classic car financing involves meeting specific criteria for both the vehicle and the borrower. Lenders assess the classic car based on its age, make and model, rarity, overall condition, and historical significance to determine its suitability as collateral. While definitions vary, a classic car is generally considered to be at least 25 years old, though some lenders may finance vehicles produced as early as 1900 or as recently as 2000, or even limited-production newer models.

Lenders prioritize the vehicle’s valuation, often requiring professional appraisals to accurately determine its worth. Appraisals consider aspects like provenance, market demand, original parts, and historical documentation. The car’s condition, including restoration details, directly influences its appraised value and borrowing power.

For the borrower, financial stability and creditworthiness are important. Lenders typically seek a credit score of 650 to 670 or higher, indicating a responsible financial history. Beyond the score, lenders evaluate an applicant’s overall financial profile, including existing debt and income stability. A debt-to-income ratio below 43% demonstrates the ability to manage additional loan payments. Lenders also review payment history and the diversity of credit accounts, such as credit cards, mortgages, and personal loans, to ensure a well-established credit report.

Sources of Financing

Several types of lenders specialize in classic car financing. Specialized classic car lenders are often preferred due to their deep understanding of the collector car market. They recognize the nuances of vehicle valuation, including rarity and historical significance, which differ from depreciation models for modern vehicles. Their expertise allows for more flexible loan terms and a tailored approach to financing these distinctive assets.

Traditional banks and credit unions may also offer financing, but their criteria can be more stringent. Many conventional lenders focus on newer vehicles with predictable depreciation, making them less equipped to finance older or rare cars. If a traditional institution offers a loan, it might have shorter terms or higher interest rates due to a lack of specialized knowledge in classic car valuation.

Other financing avenues include personal loans or home equity loans. Dealer financing might also be available, particularly through dealerships specializing in classic and antique vehicles. These sources each have their own considerations, and exploring options from lenders familiar with the collector car market can lead to more favorable terms.

Applying for a Classic Car Loan

Securing a classic car loan involves a series of steps once a borrower identifies a suitable lender and vehicle. The application process requires the submission of documents to verify financial standing and vehicle details. Borrowers provide proof of identity (e.g., driver’s license, passport) and proof of residence. Financial documentation, such as W-2 forms, recent tax returns, or pay stubs, is essential. Lenders also review payment history across credit accounts and evidence of savings, demonstrating financial prudence.

Vehicle-specific information forms a substantial part of the application. This includes the car’s Vehicle Identification Number (VIN) and a bill of sale or purchase agreement. A professional appraisal of the classic car is a requirement, providing an objective assessment of the vehicle’s value. This appraisal helps the lender determine the loan-to-value (LTV) ratio, ensuring the loan amount aligns with the car’s market worth. Appraisals typically cost between $100 and $500.

Once all documentation is submitted, the lender proceeds with underwriting, reviewing the applicant’s financial health and the vehicle’s appraised value. This stage includes assessing the car’s condition and historical context. Upon approval, final steps involve signing loan documents, arranging funding transfer, and ensuring proper title transfer. Proof of agreed-value insurance is also a requirement before loan finalization, protecting the vehicle at its true market value.

Important Loan Terms

Understanding the specific terms of a classic car loan is important for managing the financial commitment. Interest rates on classic car loans vary and are often higher than new car loans due to the unique collateral. Rates can start around 5.50% APR for well-qualified buyers, with others being higher. Factors influencing the interest rate include the borrower’s credit score, loan amount, term length, and the car’s specific value and condition.

Loan durations for classic cars are longer than traditional auto loans, which can help reduce monthly payments. Terms typically range from 24 to 144 months (two to twelve years). For higher-value classic cars, some specialized lenders offer extended terms up to 180 months (fifteen years). While longer terms can lower monthly payments, they may result in more total interest paid over the loan’s life.

Down payment requirements are standard for classic car financing. Lenders require a down payment ranging from 10% to 20% of the vehicle’s purchase price. A larger down payment can improve loan approval chances and lead to more favorable interest rates. Beyond principal and interest, borrowers may encounter fees, such as appraisal fees, which are part of the application process.

The classic car serves as collateral for the loan. Lenders require specialized agreed-value insurance, which guarantees a payout based on a predetermined value in the event of a total loss. This policy protects the investment by reflecting the car’s true market value, which is important for appreciating assets like classic cars.