The Ins and Outs of Financing a Classic Car

Classic cars sit in a different category when it comes to finance. Most lenders won't touch vehicles over 10 or 15 years old with standard car finance, and those that do often come with higher rates or stricter terms.

How Classic Car Finance Differs from Standard Car Loans

A classic car is typically classified as a vehicle over 25 years old, though some lenders draw the line at 15 or 20 years. Standard secured car loans rely on the vehicle as security, but older vehicles depreciate unpredictably or even appreciate, which makes risk assessment tricky for lenders. Most won't offer traditional secured finance for anything considered a classic or collectable.

Instead, you'll likely need a personal loan or specialist classic car finance. Personal loans are unsecured, meaning the lender can't repossess the vehicle if you default, so the interest rate tends to be higher than what you'd see on a new or used car loan. Specialist lenders exist, but they're fewer in number and often require detailed valuations or proof the vehicle is roadworthy and insured.

Consider a buyer in Perth who's found a 1972 Ford Falcon GT for $85,000. A mainstream lender offering car loans for newer vehicles won't approve finance on a car that old. The buyer applies for a personal loan instead, securing $70,000 at 9.5% over five years. The monthly repayment sits around $1,460. Compare that to a similar loan amount on a three-year-old car at 7.2%, where repayments would be closer to $1,400. The age of the vehicle directly affects both approval and cost.

Interest Rates and Loan Terms for Older Vehicles

Interest rates on classic car finance are typically 2% to 4% higher than on newer vehicles. Loan terms are also shorter, usually capped at five years rather than the seven years you might get on a late-model car. Lenders see older cars as higher risk, whether due to parts availability, repair costs, or resale uncertainty.

Some specialist lenders offer secured loans against classic cars, but they'll want a professional valuation and proof of agreed value insurance. If the car appreciates, that works in your favour when refinancing or selling, but it doesn't lower your initial interest rate. Lenders price the loan based on perceived risk at the time of application, not future value.

A buyer looking at a 1965 Holden EH Premier valued at $45,000 might find one lender willing to offer secured finance at 8.9% over four years, while another offers only a personal loan at 11.5%. The difference in monthly repayments is around $130, or over $6,000 across the loan term. If you're considering financing an older vehicle, comparing multiple lenders becomes even more important than it is for standard vehicle financing.

Deposit Requirements and Borrowing Limits

Most lenders require a deposit of at least 20% when financing a classic car, compared to 10% or even zero for newer vehicles. Some specialist lenders ask for 30% or more, particularly if the car is rare or difficult to value. The loan amount may also be capped at a certain dollar figure, regardless of the car's worth.

If you're refinancing to free up funds for a classic car purchase, a personal loan might make more sense than trying to structure the classic car itself as security. You'll have more flexibility in how you use the funds, and approval is often quicker since the lender isn't assessing the vehicle's condition or insurability.

Valuation and Insurance Considerations

Lenders offering secured finance on classic cars will require an independent valuation before approving the loan. This isn't a kerbside estimate - it's a formal assessment from a recognised valuer or club, often costing $300 to $600. The lender uses this valuation to determine how much they're willing to lend.

You'll also need agreed value insurance in place before settlement. Comprehensive cover on a classic car costs more than standard vehicle insurance because parts are harder to source and repairers with the right skills are fewer. Some insurers specialise in classic cars and offer policies that account for appreciation, while others treat them like any older vehicle and price accordingly.

If the agreed value is $60,000 but the lender's valuation comes back at $52,000, expect the loan amount to reflect the lower figure. That's another reason to arrange your valuation early, before you've committed to the purchase price.

Balloon Payments and Refinancing Classic Car Loans

Some lenders allow a balloon payment on classic car finance, where you defer a lump sum until the end of the loan term. This lowers your monthly repayment but leaves you with a large amount due at the end, which you'll need to pay in cash, refinance, or cover by selling the vehicle.

Balloon payments can make sense if you're planning to sell the car before the loan matures, or if you expect a known payment like a bonus or inheritance. For a $70,000 loan with a 30% balloon, your monthly repayment might drop by $400, but you'll owe $21,000 at the end of the term. Refinancing that amount on a car that's now even older can be difficult, so factor that into your decision.

If you do want to refinance your car loan, doing it before the vehicle crosses into classic territory gives you more lender options and potentially lower rates. Once the car hits that 15 or 20-year mark, your refinancing options narrow significantly.

What Happens If You Can't Get Approved

If lenders won't approve finance on the classic car itself, you have a few alternatives. A personal loan gives you the funds without tying them to the vehicle. You could also consider using equity in your home if you have it available, though that comes with its own risks and costs. Some buyers save and pay cash, avoiding interest altogether.

Another option is a loan health check on your existing debts. Consolidating or refinancing other loans might free up enough cash flow to fund the classic car outright or reduce the amount you need to borrow. It's not always about getting a bigger loan - sometimes it's about restructuring what you already owe.

Financing a classic car takes more planning than buying something off a dealer lot, but it's entirely doable if you know which lenders to approach and what they'll require. Call one of our team or book an appointment at a time that works for you.

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