Classic Car Loans: Special Considerations

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January 27, 2012

Those needing classic car loans are likely aware that they are purchasing a timeless bit of history. If you purchase classic cars, you generally have an appreciation for a particular model or brand of car, or appreciate the classic automobile as an icon of American history. You should seek out a lender with that same appreciation for classic cars.

There are a few things that the consumer should be aware of before they find these lenders, as there are special considerations and circumstances that will be taken into account before the lending process is completed.

Down Payment

Classic car buyers will need to expect to pay a flat 20% to 30% down on their car purchase. This may vary from what you are used to paying for a new or recently used vehicle, where down payments vary and are dependent on the car you choose and the loan terms.

However, classic cars are considered a riskier investment for a lending institution. They are, by definition, at least 25 years old, and may have unforeseen mechanical challenges.

Inspections and Other Costs

A close inspection of a classic car is considered routine and expected when applying for a classic car loan. Not only should you inspect the car carefully yourself, but you should expect to pay a specialist in the field, preferably a specialist with that particular model of vehicle, to thoroughly examine the vehicle.

You want to be certain the car is an authentic vehicle and that it has not be extensively wrecked and rebuilt without full disclosure. The price will vary depending on the amount of restoration and condition, so you want to have an accurate understanding of the condition of the vehicle.

Generally speaking, you will purchase a classic car from an individual and not a dealer. This may mean travel and shipping for the vehicle, since you likely do not want to drive a classic car long distances. This often means a purchase is taking place long distance, and a buyer will need to be sure to find an expert inspector where the vehicle is located.

Appreciation and Valuation

Classic cars are valued not only as works of art and pieces of history, but as investments as well. Some classic cars have increased in value as much as 15% a year.

You will want to have your vehicle appraised by an independent appraiser before you apply for a loan. The loan company's underwriters will also determine a value for your vehicle, and you want to have a good idea of what you think it is worth before you apply for a loan.

If there is a great deal of discrepancy between your numbers and the loan company's numbers, you'll want to have backup documentation and be prepared to discuss possible reasons for the variance in numbers.

Credit Requirements

There are no classic car loans for those with bad credit. These loans are considered luxuries, and you'll need a credit score of at least 700 in order to be considered by most classic car lenders.

The standard offering on a classic car loan is the lower of 80% of the proven value of the vehicle or 80% of the purchase price. However, the loans may extend out to as many as 12 years.

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