When financing a classic car purchase, your best option is to choose a specialty lender that deals with classic cars and collector cars. You will likely find a better interest rate, longer loan terms, and go through less work than if you choose a typical lender. This article will show you how to finance a classic car purchase, and what pitfalls to look out for.
The main reason to shop around specialty car loan lenders is the less hassle you will have to go through. These lenders deal with classic and collector car loans all the time, and they can help guide you through the purchase. Standard lenders sometimes use Kelley Blue Book or NADA price guides for classic cars and that just won't work, especially for hot rods and other customs or special editions. Having original parts and other unique options on a collector car can add value, and specialty lenders understand this. Specialty lenders can also extend the loan term, sometimes up to 12 to 15 years depending on the amount being requested. Typical auto lenders generally go up to five years.
Before you even start the loan process, you will want to check your credit score. If your FICA score is around 600 or lower, you may have a difficult time getting a loan. Anything in the 600's and you may qualify, but you may have a higher interest rate. Anything above 700 and you should have no problems securing a loan, plus you will get the added benefit of having a lower interest rate. Any lender will require 20% down on a classic car financing, and usually 30% for a hot rod.
Most specialty lenders do not require you to have a car ready for purchase before applying for the loan. You generally have 30 to 60 days after being approved to find a car, otherwise you may need to go through the approval process again. When determining the loan amount, do not forget about hidden costs of purchasing a collector car. Odds are, especially if you are looking for a certain model, color, option, etc. that you will not find it in your area. The internet can be a great tool in helping you find the exact car you are looking for, but that car is probably in another state or region, requiring travel and transportation. You may want to travel to see the car, which will cost money, and you will need to transport it back if you do not want to drive it. Depending on how far away the car is, driving it may not be an option due to strict insurance restrictions. All this may be able to be rolled into the loan amount. Talk to your lender about these options.
Many lenders require an inspection of the car by a qualified inspector. The lender will be able to help with this, since they probably have certain inspectors they require you to use. Many buyers choose to have their car inspected before purchase anyhow, so make sure you talk to the lender before deciding on an inspection company. If the inspector you choose is not certified by your lender, you may be required to purchase another inspection, costing hundreds of dollars more.
Even if you have the money saved to buy a collector car outright, it may be in your best interest to pursue a classic car financing. Over the last 15 to 20 years, the value of collector and classic cars have gone up sharply, sometimes 10% or more a year. Considering a classic car financing is probably 6% or so, this makes borrowing the money an investment. But be careful during these economic down times and do your research. Rare and original models are still going up in value, but clones and other mid models are not rising in value as fast as they once did. This could change at anytime though.
There is no better feeling than driving around in your new classic car. Hopefully this article will help you in securing a low interest loan, and speed up the process so you can drive around town in your new ride, rather than dealing with headaches you may have by going through a typical lending company.
The main reason to shop around specialty car loan lenders is the less hassle you will have to go through. These lenders deal with classic and collector car loans all the time, and they can help guide you through the purchase. Standard lenders sometimes use Kelley Blue Book or NADA price guides for classic cars and that just won't work, especially for hot rods and other customs or special editions. Having original parts and other unique options on a collector car can add value, and specialty lenders understand this. Specialty lenders can also extend the loan term, sometimes up to 12 to 15 years depending on the amount being requested. Typical auto lenders generally go up to five years.
Before you even start the loan process, you will want to check your credit score. If your FICA score is around 600 or lower, you may have a difficult time getting a loan. Anything in the 600's and you may qualify, but you may have a higher interest rate. Anything above 700 and you should have no problems securing a loan, plus you will get the added benefit of having a lower interest rate. Any lender will require 20% down on a classic car financing, and usually 30% for a hot rod.
Most specialty lenders do not require you to have a car ready for purchase before applying for the loan. You generally have 30 to 60 days after being approved to find a car, otherwise you may need to go through the approval process again. When determining the loan amount, do not forget about hidden costs of purchasing a collector car. Odds are, especially if you are looking for a certain model, color, option, etc. that you will not find it in your area. The internet can be a great tool in helping you find the exact car you are looking for, but that car is probably in another state or region, requiring travel and transportation. You may want to travel to see the car, which will cost money, and you will need to transport it back if you do not want to drive it. Depending on how far away the car is, driving it may not be an option due to strict insurance restrictions. All this may be able to be rolled into the loan amount. Talk to your lender about these options.
Many lenders require an inspection of the car by a qualified inspector. The lender will be able to help with this, since they probably have certain inspectors they require you to use. Many buyers choose to have their car inspected before purchase anyhow, so make sure you talk to the lender before deciding on an inspection company. If the inspector you choose is not certified by your lender, you may be required to purchase another inspection, costing hundreds of dollars more.
Even if you have the money saved to buy a collector car outright, it may be in your best interest to pursue a classic car financing. Over the last 15 to 20 years, the value of collector and classic cars have gone up sharply, sometimes 10% or more a year. Considering a classic car financing is probably 6% or so, this makes borrowing the money an investment. But be careful during these economic down times and do your research. Rare and original models are still going up in value, but clones and other mid models are not rising in value as fast as they once did. This could change at anytime though.
There is no better feeling than driving around in your new classic car. Hopefully this article will help you in securing a low interest loan, and speed up the process so you can drive around town in your new ride, rather than dealing with headaches you may have by going through a typical lending company.
