Love Classic Cars? Here are Some Things to Consider.
The smooth lines, sumptuous curves and oh, that unmistakable purr. If you’re a classic car enthusiast, these tantalizing traits are just part of the equation. Because besides the obvious attributes—timeless design, intricate details and craftsmanship—there’s a sense of gratification that comes along with classic cars that’s hard to surpass.
If you’re the restorer then you feel an immense sense of pride in a job well done. If you’re the buyer, you’ve instantly made a statement of impeccable taste. And if that’s a perk for you, you’re definitely not alone.
In fact, the value of classic cars has increased 334% over the past decade, according to the Knight Frank Luxury Investment Index. That growth far outpaces the growth in the value of art, wine, coins, or almost any other collector item. And while that’s gratifying to hear as a classic car collector, it’s still not why you got into the classic car game. You see the value beyond just thinking of your car as an “asset.”
Looking into Classic Car Loans
Banks don’t always see the same value in antique cars as collectors do. Traditional car loan lenders are used to seeing cars as depreciating in value over time, so a decades-old vehicle doesn’t generally look very appealing.
There are, however, lenders that offer loans specifically designed for classic car financing , with varying terms and rates. The interest rate and terms you qualify for typically will depend on your credit history and income. Most of these lenders offer 10-year loan terms (or 120 payments), whereas a typical car loan is often five or seven years.
But there are downsides, too. Longer loan terms mean you pay more in interest over the life of the loan. Lenders also often have specific rules about the car you purchase, including how old it can be, where it can be purchased, and the type of vehicle. They may also require an appraisal and physical inspection of the car.
How to Find Classic Car Financing
An alternative to traditional car financing is to take out a home equity loan. Also known as a second mortgage, this allows you to borrow money against the value of your home for any purpose.
Home equity loans are frequently used as a source of financing for home remodeling, college tuition, or putting a down payment on a second home. Given the flexibility of a home equity loan, there’s probably no reason you couldn’t use one to pay for a classic car.
However, this option comes with downsides: You’ll likely pay high fees when you take out the loan and, if you have a variable interest rate, your interest payments can rise dramatically over time. If you end up not being able to repay the loan on time, you may put your home at risk of foreclosure. This is why conventional wisdom suggests that home equity loans ideally only be used to potentially improve the value of your home, not to make a discretionary purchase like a classic car.
Given that you’re buying a car, you might think about turning to a traditional auto loan. In reality, however, a conventional auto loan isn’t always a fit for a classic car purchase. Cars typically lose value over time, so older vehicles can be challenging for lenders that don’t specialize in vintage cars. Even if you are able to get a loan, you might have to pay a larger down payment or agree to a higher interest rate, since it’s generally harder for the lender to ascertain a classic car’s value.
Another potential option for financing a vintage car can be a personal loan. In some cases, you can take out an unsecured personal loan without putting up any collateral (like your home) on the line. And personal loan interest rates may be lower than those you’ll typically find for classic car loans. SoFi, for example, offers personal loans up to $100,000 with no origination fees.
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The information provided is not meant to provide investment or financial advice. Investment decisions should be based on an individual’s specific financial needs, goals and risk profile.