What Is the Oldest Car a Bank Will Finance?
Learn how banks determine the oldest car they will finance, including key factors like age limits, condition, loan terms, and alternative financing options.
Buying a used car with financing can be tricky, especially for older models. Banks and lenders have specific rules about vehicle age, which can limit options for buyers.
Understanding these restrictions is crucial when financing an aging vehicle. Several factors influence loan approval, including the car’s condition, mileage, and loan-to-value ratio.
Age Criteria
Most banks and credit unions limit financing to vehicles no older than 10 to 15 years. If you’re looking at a car from the early 2010s or older, securing a traditional auto loan may be difficult. Some credit unions and specialty lenders extend financing to cars up to 20 years old but often impose stricter terms, such as higher interest rates or shorter repayment periods.
Lenders set these limits because older cars depreciate significantly and are harder to resell if repossessed. High mileage or mechanical issues further reduce their marketability.
Exceptions exist for classic or collector cars, which require specialty financing. Lenders consider rarity and historical significance, often requiring independent appraisals and larger down payments. These loans typically come with higher interest rates and shorter repayment terms.
Condition and Mileage Factors
A vehicle’s condition plays a key role in loan approval. Lenders assess mechanical reliability, structural integrity, and maintenance history. A well-maintained car with a clean service record has a better chance of securing financing than one with a history of major repairs or accidents. Many lenders request a vehicle history report from Carfax or AutoCheck to verify past ownership, accident history, and title status. Cars with salvage or rebuilt titles are rarely approved due to their diminished resale value and higher risk of mechanical failure.
Mileage is another major factor. Many lenders set limits between 100,000 and 150,000 miles, though exceptions may be made for well-maintained vehicles. High-mileage cars pose a greater risk due to potential repair costs, especially for major components like the engine and transmission. If a car exceeds a lender’s mileage threshold, buyers may need to seek alternative financing or make a larger down payment.
Loan-to-Value Ratios
Lenders assess the loan-to-value (LTV) ratio to determine financing eligibility. Most banks and credit unions prefer LTV ratios below 100%, meaning they won’t lend more than the car’s appraised value. Older vehicles typically require lower LTV ratios, necessitating larger down payments.
To determine a car’s worth, lenders reference pricing guides like Kelley Blue Book (KBB), the National Automobile Dealers Association (NADA) guide, or Black Book. If a vehicle is valued at $8,000 but a borrower requests a $10,000 loan, the LTV ratio would be 125%, which most lenders would reject. To secure approval, the borrower must either reduce the loan amount or increase the down payment.
LTV ratios also affect loan terms. Higher-risk loans may have shorter repayment periods or increased interest rates. If a car’s value is difficult to assess—such as with rare models—some lenders may require an independent appraisal before finalizing the loan.
Interest and Repayment Terms
Financing an older vehicle often means higher interest rates. Since these cars have lower resale values and higher mechanical risks, lenders charge more interest to offset potential losses. Borrowers can expect rates to be several percentage points higher than those for newer models, especially for loan terms exceeding 36 months.
Lenders also impose shorter repayment periods, typically capping loans at 48 to 60 months. Unlike new car loans, which can extend up to 84 months, shorter terms prevent borrowers from owing more than the car is worth. However, this results in higher monthly payments.
Alternative Financing Outlets
When traditional lenders impose restrictions, buyers may need to explore alternative options. These sources often have more flexible criteria but may charge higher interest rates, impose shorter loan terms, or include additional fees.
Buy Here, Pay Here (BHPH) dealerships offer in-house financing, making them an option for buyers with limited credit history or those purchasing older cars that banks won’t finance. While approval rates are high, BHPH loans often carry interest rates exceeding 20% and may require frequent payments. Many of these dealerships install GPS tracking devices or remote disable systems, allowing them to repossess the car quickly if payments are missed. Buyers should carefully review terms before committing.
Personal loans from online lenders or peer-to-peer platforms are another option. Unlike auto loans, personal loans are typically unsecured, meaning they don’t require the vehicle as collateral. This can be beneficial if the car doesn’t meet traditional financing criteria, but it often results in higher interest rates and shorter repayment terms.
Some borrowers may consider using a home equity loan or line of credit (HELOC) if they have sufficient equity in their property. While this can provide lower interest rates than unsecured loans, it carries the risk of losing the home if payments aren’t made. Buyers should weigh the risks carefully before using home equity to finance a car purchase.