Part 2 of 3 – Financing a Classic Car
Regular banks and other lending institutions don’t understand the concept of providing a loan for a car that is likely decades old. They don’t understand the risks, and they don’t understand the potential rewards. So most simply – don’t do it.
Two of the larger companies that finance classic cars are J.J. Best Banc & Company and Woodside Credit, and there are others as well.
They all work in a similar manner. Most classic car purchases are looked at on an individual basis with the type of car and the owner’s credit rating determining the interest rate and the down payment. Expect down payments ranging from 10% to 30% with interest rates ranging from 5% to 10%. In most cases you can also finance the sales tax into the loan, and with some finance companies you can even build the cost of a warranty into the loan.
The length of the loan is generally in the ten to twelve year range and there are usually no pre-payment penalties.
Speculators are frowned upon. Much like a classic car insurance company, these finance companies minimize their risk by financing people who want to own and enjoy the car, not speculate on its appreciation in value. Likewise, they are aware that it is virtually impossible to restore a collector car without quickly being “under-water.” Since the car is their collateral, a car that is “under-water” is not a particularly attractive piece of collateral.
Next Week: Financing a Classic Car – Part 3 of 3