Looking for ways fund a classic car


For many of us, the attractions of a classic car are clear.

Incredible styling, hand built or sometimes eccentric engineering and the degree of uniqueness that came before the days of computer aided design which resulted in many cars simply looking and feeling the same. All these and other reasons like them, encourage many to enter into this field.

Here at ACF Direct, we are experts in finding innovative solutions for financing things such as classic car purchases. Here we will try to offer a quick overview of this particular domain.

What is a classic car?

There is no universally accepted definition of “classic car”. Very broadly speaking, many people might consider it to be any vehicle that is more than around 25 years old.

Whatever term you and the seller choose to describe the vehicle concerned, it’s probably fair to say that you may have to think a little outside the box in order to find financing for classic car purchases.

Financing

It’s important to recognise that classic cars might typically be seen as coming into one of two categories:

  • vehicles that are referred to as classic by virtue of their age alone. They may be of relatively low value and require considerable restoration and refurbishment;
  • cars that are defined as classic by virtue of consideration of their age, condition, value and marque. Typically these vehicles are in pristine fully restored condition and may command premium prices. They might include household-names such as Aston Martin, Mercedes, Ferrari and so on.

The financing method you use for each of these categories may be quite different.

Vehicles offering potential but requiring significant restoration

There are so many potential combinations of circumstances here that it is difficult to concisely describe them.

Perhaps the vehicle’s purchase cost is relatively small but its resale value once restored could be very significant. However, the restoration costs alone may be extremely high.

The difficulty for some conventional lending here is that at the time you purchase it, the vehicle may offer very little security in terms of its valuation against the loan. You may also be looking to finance the restoration costs and therefore asking a lender to join you in speculating on its completion date and value after restoration.

Vehicles that are already classics and of high value

Some conventional lenders may be reluctant to lend against vehicles that are more than a specified number of years old.

Others, however, may welcome such propositions.

Hire Purchase (HP) is typically one favoured method for classic car purchases of high-value vehicles of any type, including those defined as “prestige”.

As with typical hire purchase arrangements, the lender will purchase the vehicle in their name and then allow you to use it as its registered keeper. You would then pay off the loan over a period of time and once it is cleared, the vehicle will become legally yours.

Whilst you are making those repayments, you cannot legally sell the vehicle, as it is not yet yours to sell.

Summary

The optimum method for funding your proposed purchase of a classic car may vary significantly, depending upon the vehicle, its condition plus its current and projected values.

In terms of restoration projects, it is particularly important to look closely at the mathematics and to err towards conservatism when making your estimations of the vehicle’s future value after restoration.

In the case of existing fully-restored/maintained and prestigious classics, that equation may be typically easier because market values for such vehicles and marques are usually easier to be sure of. There is also no uncertainty about major restoration costs.

Please don’t hesitate to contact us for a fuller discussion of your objectives here.