The Pros and Cons of Classic Car Loans

What Makes Financing a Classic Car Different

Classic car finance works differently to standard car loans because lenders view older vehicles as higher risk. Most lenders won't finance cars over 10-12 years old through their standard products, and classic cars often require specialist assessment for age, condition, and resale value.

Consider a buyer wanting to finance a 1970s Ford Falcon GT. The car is valued at $65,000 based on recent auction sales, but the buyer only has $15,000 saved. A standard secured loan won't cover a vehicle that old, so they need a lender who offers classic or enthusiast vehicle finance. The lender arranges an independent valuation, confirms the car is insured for agreed value, and approves a $50,000 loan at a higher interest rate than a new car loan - typically 2-3% more. The buyer secures the car but pays around $950 per month over five years instead of the $800 they'd pay for a newer vehicle at standard rates.

How Lenders Assess Classic Vehicles

Lenders evaluating a classic car will request a professional valuation, proof of comprehensive agreed-value insurance, and evidence the car is roadworthy or stored securely. They're assessing whether the vehicle holds its value and whether you can realistically maintain it.

The loan amount approved usually sits at 70-80% of the valuation rather than the 100% you might access with a used car loan on a five-year-old sedan. If the valuation comes in at $50,000, expect to borrow $35,000-$40,000 maximum. You'll need a larger deposit or trade-in to cover the gap. Some lenders also cap loan terms at three years for classic cars instead of the usual five to seven years, which pushes monthly repayments higher.

Interest Rates and Total Borrowing Costs

Interest rates on classic car finance typically range from 8-12%, compared to 6-9% for standard vehicle finance. A $40,000 loan at 10% over five years costs around $850 per month and $11,000 in total interest. The same amount at 7% costs $792 per month and $7,520 in interest - a difference of $3,480 over the loan term.

If you're financing a classic car alongside a family vehicle or home loan, lenders assess your total debt when calculating borrowing capacity. Two car loans plus a mortgage can limit how much you're approved for or push you toward a shorter loan term to keep repayments manageable. Some families opt for personal savings or a refinance car loan on their existing vehicle to free up equity rather than taking on a second secured loan.

Insurance Requirements That Affect Approval

Agreed-value insurance is usually mandatory before a lender releases funds for a classic car. This type of policy locks in the insured amount based on the car's appraised value rather than market value at the time of a claim. If you can't secure agreed-value cover, most specialist lenders won't proceed.

Insurance premiums for classic cars often run higher than standard comprehensive policies, particularly if you plan to drive the car regularly rather than keep it garaged. A family buying a classic as a weekend car might pay $1,200-$1,800 per year in insurance compared to $800 for a daily driver. Factor this into your budget alongside loan repayments, registration, and maintenance when working out affordability.

Maintenance Costs and Loan Serviceability

Lenders want to know you can afford ongoing costs, not just the monthly repayment. Classic cars often need specialist parts, higher servicing fees, and more frequent mechanical attention than modern vehicles. A lender may ask about your household income, existing debts, and whether you have contingency funds for repairs.

In a scenario where a young family finances a 1980s Porsche 911 valued at $70,000, they borrow $50,000 and budget $900 per month for the loan. Six months in, the gearbox fails and the repair costs $8,000. Without savings or insurance coverage for mechanical failure, they're forced to take out a personal loan or put the repair on a credit card, which affects their ability to service the original car loan. Lenders can't predict every mechanical issue, but they do assess whether your income and expenses leave room for unexpected costs.

When Classic Car Finance Makes Sense

Financing a classic car works if the vehicle holds or appreciates in value, you have stable income to cover higher repayments, and you're not stretching your budget to the point where one unexpected cost creates financial pressure. It's less suitable if you need reliable daily transport for a growing family or if the car requires extensive restoration work that increases your total outlay beyond the original loan amount.

Some buyers use classic car finance to secure a vehicle they'll enjoy for years while building equity in an appreciating asset. Others find the combination of higher interest rates, larger deposits, and ongoing maintenance makes ownership more expensive than anticipated. Your decision should factor in how often you'll use the car, whether you have a second vehicle for daily use, and how much flexibility you need in your monthly budget.

Getting Your Finance Approved

Start by finding a valuer experienced with your specific make and model. Lenders rely on this valuation to determine loan amount and risk, so an accurate assessment matters. Arrange agreed-value insurance quotes before you apply so you know the total monthly cost including loan repayments and premiums.

You'll typically need proof of income for the past three to six months, details of your existing debts, and a deposit of at least 20-30% of the car's value. Some lenders offer pre-approval, which gives you a clear budget before you commit to a purchase. If you're self-employed or hold an ABN, expect to provide additional financial documentation including tax returns or business activity statements.

Call one of our team or book an appointment at a time that works for you to discuss your classic car finance options and get a clear picture of what you can borrow, at what rate, and over what term.

Frequently Asked Questions