Top tips to finance a classic car purchase

Classic cars occupy a unique position in the lending market.

Most mainstream lenders avoid vehicles over 10 to 15 years old, which means securing finance for a classic requires working with specialist lenders who understand collectible vehicles. The key to approval sits with a credible valuation and clear evidence the vehicle justifies the loan amount you're requesting.

Why standard car loans don't suit classic vehicles

Standard secured car loans rely on the vehicle as security, with lenders expecting the asset to hold sufficient value throughout the loan term. Classic cars don't depreciate in the predictable pattern lenders prefer. Some appreciate, some hold steady, and others lose value depending on condition, originality, and market demand. Most direct lenders and dealer financing arrangements won't touch vehicles that fall outside their age and model criteria, which typically caps eligibility at around 12 years from manufacture.

Consider a buyer pursuing a 1972 Ford Mustang Mach 1 listed at $85,000. A mainstream bank won't assess this as a standard used car loan because their systems flag the vehicle age immediately. Instead, the buyer needs a lender who evaluates the car as a collectible asset, assesses its market value independently, and structures the loan accordingly. In this scenario, the lender required a professional valuation from a classic car specialist, confirmation of the vehicle's condition through inspection, and a 30% deposit to proceed. The loan amount of approximately $60,000 was approved over five years at a rate slightly higher than a new car loan, reflecting the specialised nature of the security.

What lenders assess when financing classic cars

Lenders evaluate three primary factors: the vehicle's confirmed market value, your capacity to service the loan, and the deposit you're contributing. A professional valuation is non-negotiable. Lenders won't rely on the seller's asking price or your own research. They want an independent assessment from a qualified valuer who can confirm the vehicle's authenticity, condition, and realistic market worth. This valuation protects both you and the lender from overcommitting to a vehicle that won't hold its value.

Your income and existing commitments determine how much you can borrow, just as they would with any secured car loan application. The monthly repayment needs to fit within your verified capacity. Most specialist lenders require a deposit between 20% and 40%, depending on the vehicle and your financial position. A larger deposit reduces the lender's risk and improves your chance of finance approval. If you're refinancing an existing vehicle or leveraging equity elsewhere, that can sometimes reduce the cash deposit required, but you'll still need to demonstrate genuine financial commitment to the purchase.

How interest rates differ for classic car finance

Rates for classic car loans typically sit higher than standard new or used car loans. Where a new car finance package might attract rates from around 6% to 8% depending on your credit profile and the lender, classic car loans often start closer to 8% and can reach into double digits with some specialist lenders. The difference reflects the niche nature of the asset and the smaller pool of lenders willing to participate.

Some buyers attempt to use a personal loan instead, which avoids the vehicle age restrictions but often carries even higher rates and removes the tax advantages available with a secured car loan. If you're purchasing the classic for business purposes or as part of a collection that generates income, the interest may be deductible, but you'll need to speak with your accountant to confirm eligibility. A car loan comparison across multiple lenders helps identify which structures and rates genuinely suit your circumstances, rather than accepting the first offer that clears the age hurdle.

When a balloon payment makes sense

A balloon payment allows you to defer a lump sum to the end of the loan term, which reduces your monthly repayment during the loan period. This structure can work well for classic car buyers who expect the vehicle to hold or increase in value, or who plan to refinance or sell before the balloon falls due. As an example, a $70,000 loan over five years with a 30% balloon payment would defer $21,000 to the final payment, dropping the monthly repayment noticeably compared to a fully amortising loan.

The risk is that you're committing to a large payment at maturity, and if the vehicle's value has declined or your circumstances have changed, you'll need to refinance or sell to cover the amount. Balloons suit buyers with a clear exit strategy or those who have confidence in the vehicle's ongoing value. If you're unsure whether the classic will appreciate or you're financing close to your upper limit, a standard loan structure without a balloon may offer more certainty.

Valuation and inspection requirements

Every lender financing a classic car will insist on a professional valuation before approving the loan amount. This isn't a desktop estimate or a printout from an online listing. It's a formal document prepared by an accredited valuer who inspects the vehicle in person and provides a written assessment of its condition, originality, and current market value. The valuation typically costs between $300 and $600, and the buyer usually pays for it upfront.

Some lenders also require a mechanical inspection or a roadworthy certificate, particularly if the vehicle is being purchased interstate or from a private seller. These checks confirm the car is in the condition described and reduce the chance of post-purchase disputes. If you're buying from a dealer or auction house, the seller may already have documentation available, but it's worth confirming early so you're not waiting on paperwork after you've committed to the purchase. The valuation and inspection reports become part of your loan application and directly influence the loan amount the lender will approve.

How deposit size affects approval

A larger deposit improves your approval odds and may unlock access to lower rates or more flexible loan terms. Specialist lenders want to see that you have genuine savings or equity contributing to the purchase, which signals commitment and reduces their exposure if the vehicle needs to be sold to recover the debt. A 20% deposit is typically the minimum, but 30% or more is common for older or higher-value classics.

If you're trading in another vehicle, that equity can form part of your deposit, but the trade-in value needs to be realistic and verifiable. Some buyers also use savings from a redraw facility on their home loan or funds from an offset account, which can speed up the process if the cash is readily accessible. No deposit options are rarely available for classic cars due to the specialised nature of the asset and the limited lender appetite for this type of security.

The loan application process for classic cars

The car loan application process for a classic follows the same structure as any secured car loan, with additional steps for valuation and vehicle verification. You'll provide proof of income, details of your existing debts, and identification documents. The lender will assess your borrowing capacity and confirm you can service the monthly repayment alongside your other commitments. Once your financial position is approved in principle, the focus shifts to the vehicle.

You'll arrange the valuation and provide the lender with the report. If the valuation supports the loan amount you're requesting, the lender moves to formal approval. If the valuation comes in lower than the purchase price, you'll need to increase your deposit or renegotiate with the seller. Settlement timing depends on how quickly the paperwork is completed, but it's rarely as fast as instant approval offers you might see for new car finance. Specialist lending takes longer because fewer lenders are involved and each application is assessed individually rather than through automated systems.

Insurance and ongoing costs

Classic car insurance differs from standard comprehensive cover. You'll need an agreed value policy that reflects the vehicle's true worth, and premiums are often higher due to the replacement cost and the limited availability of parts. Some insurers specialise in classic and collectible vehicles, offering policies tailored to limited use or vehicles kept in secure storage. The lender will require comprehensive insurance as a condition of the loan, with their interest noted on the policy.

Ongoing maintenance and parts availability should factor into your decision to finance a particular vehicle. If parts are scarce or expensive, or if specialist mechanical knowledge is required, your running costs will sit higher than a modern vehicle. These costs don't directly affect loan approval, but they do affect whether the monthly repayment remains affordable once you're covering registration, insurance, and upkeep. A realistic view of total ownership cost prevents buyers from overcommitting to a loan amount that leaves no room for repairs or restoration work.

Securing the right vehicle financing structure means working with someone who understands how specialist lenders assess classic cars and can position your application to meet their criteria. Call one of our team or book an appointment at a time that works for you.

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