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How to Finance a Classic Car

For most people, a car is just a way to get from point A to point B. But classic car enthusiasts have a different perspective on automobiles — they see cars as a way to travel back in time in style.

“Some people associate classic cars with their youth, or another happy period from their life, while others recognize them for their artistic beauty,” said Steve Linden, who has offered specialized vintage vehicle services, such as classic car appraisals and pre-purchase inspections, for more than 25 years.

Classic cars have a wide price range, starting around four figures and potentially rising to tens of millions of dollars. Here’s what you need to know about classic cars if you’re interested in buying one, including how you can finance the purchase of a vintage vehicle, since a traditional auto loan likely isn’t an option.

What is a classic car?

The exact definition of a classic car will depend on who you ask.

“I believe [a classic car] is anything over 30 years old,” said David Ankin, a classic car enthusiast and chief executive officer of ToyMakerz, a custom vehicle fabrication shop and the subject of a show aired on the History channel. “For me, it’s an old car [from] the ‘40s [or] ‘50s.”

The Classic Car Club of America has a stricter definition of classic cars as motor vehicles built from 1915 to 1948 that have “fine design, high engineering standards and superior workmanship.”

The definition of classic cars may also vary from state to state. The California vehicle code, for example, offers special plates to cars that meet certain criteria, such as vehicles with engines with 16 or more cylinders built before 1965, cars manufactured in 1922 or earlier and vehicles built after 1922 that are of historic interest and at least 25 years old. Minnesota offers classic car plates for vehicles manufactured from 1925 through 1948 that meet certain standards of design, engineering and workmanship.

There’s also no standard definition of classic cars for insurance purposes. According to the Insurance Information Institute, you might need specialized insurance if you own an antique or classic car (typically 25 to 30 years old), hotrods, muscle cars and classic trucks. State Farm defines classic cars as vehicles with historic interest that are between 10 and 24 years old, and classifies similar vehicles as “antique cars” if they’re 25 or more years old.

How much does a classic car cost?

The sky’s the limit when it comes to the cost of a classic car, but according to Linden, enthusiasts on a budget might be pleased to discover that they can get a classic car for as little as a few thousand dollars.

“One can buy a beautiful classic car from almost any time period, and almost any region of the world, for as little as $5,000, or they can spend over $50 million for the most desirable collector cars,” he said.

You can expect to spend around $106,000 for a typical collectible American car from the 1950s, like a 1957 Ford Thunderbird or a 1954 Buick Skylark Model 100, according to the Hagerty Price Guide Index. Another index from Hagerty shows that an affordable classic — like a 1967 Volkswagen Beetle or a 1972 Triumph TR6 — is valued around $27,000.

How much you’ll pay for any given vehicle will depend on a variety of factors, including:

  • Condition and appearance: Original components, like gearshifts and carpeting, that are kept in great condition will increase the value of a classic car. The paint color can also influence the price of classic cars.
  • Mileage: A classic car that hasn’t been driven much may command a higher price tag than a high-mileage vehicle.
  • Age: When it comes to classic cars, you should expect to pay more for an older vehicle.
  • Brand: Classic cars from certain manufacturers, such as Ferrari and Porsche, tend to cost more.

When budgeting for a classic car, you’ll also need to plan for other expenses, like maintenance, gas and storage. These costs can vary depending on your situation. While Ankin is able to store one of his classic cars in his own garage for free, he spends about $10,000 on fuel, $5,000 on tires and $2,500 on maintenance every year.

Finally, you may want or need to get insurance for your classic car. You may be able to get conventional car insurance on a classic car if you plan to use it as your main vehicle, said Linden. “Costs are comparable to your modern cars, but in the event of a total loss, you might have a disagreement with your insurance company as to the value of your classic car,” he explained.

Another option may be to get specialized classic car insurance, which tends to cost less than conventional car insurance, added Linden. “With these policies, you and the insurance company come to an agreement as to the value of the car, and in the event of a loss, that is what you get paid,” he said.

When you’re looking for the right classic car for you, ask around — many classic car sales happen through private sales advertised through word of mouth, said Linden. You can also find classic cars at dealerships, online, at shows and through auctions.

How to finance a classic car

When you’re on the road to classic car ownership, you’ll need to find a way to pay for your vehicle. It should go without saying that cash is always an option for making the purchase, and it’s definitely the best choice as you won’t pay any interest.

However, if you don’t have enough savings to dip in to, you may be able to obtain financing for a classic car. Here are some potential ways to finance the vehicle:

1. Classic car loans

Some lenders specialize in classic car financing, which means they may help you better understand that market and how the value of these vehicles can change over time. J.J. Best Banc & Co., for example, offers financing for many types of classic cars, including collectible vehicles, antique cars, hot rods and muscle cars.

Other lenders that provide financing for classic cars include SunTrust, LightStream, Woodside Credit, Collector Car Lending and DuPage Credit Union. This tool can help you figure out what your monthly payments might be on an auto loan. However, it’s worth noting that borrowers may have trouble using a traditional auto loan to finance a classic car, as those vehicles don’t usually meet lenders’ age and mileage requirements.

2. Personal loans

You may also be able to take out a personal loan to finance the purchase of a classic car. A personal loan will typically allow you to borrow $1,000 to $50,000. Lenders may have requirements for your credit score and payment history. You may also need to put down collateral to secure a lower interest rate. While interest rates for personal loans can be competitive if you have a good credit score, APRs could be higher than with an auto loan.

3. HELOCs or home equity loans

If you have equity in your home, you may be able to leverage it to finance a classic car. The amount of your loan will depend on how much equity you have in your home. A home equity line of credit (HELOC) acts like a credit card, allowing a borrower to use it to make purchases during the draw period. You’ll make interest-only payments during this time, and eventually start paying on the principal during the repayment period.

Home equity loans, on the other hand, allow you to obtain a lump sum of money that can be used for purchases. You’ll have a fixed monthly bill to repay the loan.

Keep in mind that with HELOCs and home equity loans, you’re using your home as collateral, so it will be at risk if you can’t keep up with payments. You may also need to pay closing costs.

Classic car loan requirements

Requirements for a classic car loan may vary by lender. Some lenders may only offer financing to borrowers with a FICO score of 700 or above and a good credit history with no bankruptcies on their record. It’s not uncommon for lenders to seek an appraisal and inspect the car. While some lenders may stipulate that you put a down payment on the car, others may offer to waive that requirement.

Alternatives to buying a classic car

Do you love the idea of owning a classic car, but can’t commit right now? Leasing a classic car might be an alternative that’s worth considering. This typically allows you to pay an upfront fee and a monthly fee to essentially rent a classic car for a fixed period of time. You may incur fees and penalties for going over a fixed mileage or terminating your lease early. Close-ended leases give you the option to return the vehicle at the end of the term, whereas open-ended leases mandate that you purchase the car for the current market value at the end of the term.

While leasing a classic car allows you to switch vehicles relatively frequently, it may come with downsides. The most obvious one is that you don’t have ownership of the car, so if the vehicle appreciates over the term of the lease, you won’t reap the benefit of that increase in value. Leasing can be an affordable way to dip your toe in the world of classic cars, but it might be worth buying a vehicle outright if you plan to treat it as an investment.

The bottom line

Owning a classic car can be a fun and potentially lucrative hobby, but it’s important to do your research to know what you’re getting into. Make sure you understand the cost of the vehicle and how it may change over time. It’s also a good idea to talk to other classic car owners about what to expect in terms of maintenance and storage. A little bit of homework upfront can help you find and enjoy the classic car of your dreams for the long term.

 

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