Car loans for classic cars

Favourites of collectors and motoring enthusiasts, classic cars are beloved automotive models from ages past. Classic cars tend to be known for iconic designs and may also offer exceptional performance.

A vehicle can usually be defined as a classic car in Australia if it’s more than 30 years old. If it’s been maintained to remain as close to its original condition as possible, it may be considered a historic vehicle. But if it’s been modified enough to meet modern safety standards, it may be considered a classic car.

Classic cars tend to have higher than average price points, and may also cost more to insure, register and service. Most state governments require that classic cars apply for special registration, which may require that you be a member of a motoring club. You may also be limited to using your vehicle at car shows, motoring club events and the like, or you may need to keep a logbook of when they’re driven for other purposes.

Additionally, not all standard car loans will be appropriate for financing a classic car purchase, so you may need to seek out a specialist lender for classic cars.

It’s often said that the moment you drive a new car out of the car yard, it starts to depreciate and lose value. The older the car is and the more you drive it, the more it depreciates.

However, historic, vintage and classic cars can sometimes prove an exception. As these vehicles are sought after by collectors and enthusiasts, their value can sometimes increase over time. Some investors have made significant returns from investments in classic cars, with prices rising around 30% between 2011 and 2021, compared to around 4.5% for gold over the same period.

Additionally, some collectors can make money out of purchasing an older car, restoring it to an acceptable standard, and selling it at a profit – a lot like “house flipping” in real estate markets.  

However, it’s important to note that just because a car is old, that doesn’t make it a classic car or a collector’s item. A car is only worth what someone is willing to pay for it, and not all cars will prove desirable to collectors and enthusiasts. Rare models or iconic designs are more likely to be considered classics than more common everyday vehicles.

Even if you are the proud owner of a piece of motoring history, it may cost you money over time to keep your vehicle safely garaged, insured and well-maintained to protect against theft and damage. Also, restoring and maintaining a classic car often requires specialist skills, tools and parts, which could prove expensive, so making money fixing up and selling old cars may not be as easy as you expect.

While it is possible to borrow money to buy a classic car, it may not be as simple as comparing everyday car loans and making an application. This is because classic cars may not fulfil all of the eligibility for some car loans, particularly secured car loans.

Even if you’re looking at a used car loan, some lenders may not approve a loan for a car that’s more than five or ten years old – that’s a problem if you’re looking at a vehicle that was manufactured more than three decades ago.

There are some specialist lenders that are experts in financing classic and vintage cars. While these lenders may be able to offer you a secured car loan, they may also need to conduct a valuation of the car first before they can approve your application.

Alternatively you may be able to secure a loan to buy a classic car using equity in your home or savings in a term deposit as collateral, provided you’re content to put your home or savings at risk if you can’t keep up with your repayments.

You could also apply for an unsecured personal loan, though you may not be able to borrow as much money and your interest rates could be higher, especially if your credit score isn’t the best. You could consider taking some time to improve your credit score before you apply for a personal loan.

Keep in mind that some classic cars could have high price tags. Even if you successfully apply for a loan with a low interest rate, you may still end up paying a significant sum in interest charges on your vehicle. Plus, some lenders have a maximum amount they’re willing to lend, based on your income, credit score and other factors, so you may not be able to borrow enough to afford the classic car you want in every instance.