The Pros and Cons of Financing a Classic Car

Most lenders treat classic cars differently to modern vehicles, which means the approval process and loan structure will look different to what you'd encounter with standard car loans.

The immediate challenge is that classic cars don't fit neatly into standard lending criteria. Age restrictions, valuation methods, and security assessments all shift when the vehicle is decades old rather than showroom fresh. Understanding what lenders need before you start shopping gives you a clearer picture of what's actually achievable.

What Counts as a Classic Car for Lending Purposes

Most lenders define a classic car as one that's 25 years or older, though some draw the line at 30 years. The distinction matters because it determines which lenders will consider your application and what documentation they'll require.

A car that's simply old doesn't automatically qualify. Lenders typically look for vehicles that hold or appreciate in value due to rarity, historical significance, or desirability among collectors. A 1975 family sedan in average condition won't meet the criteria, but a 1975 Holden Torana A9X or Porsche 911 likely will.

The vehicle's condition plays a major role. Lenders want professional valuations that confirm the car's worth, and they'll often require evidence of how the vehicle has been maintained or restored. For a car that's been modified from its original specification, some lenders will reduce the loan amount or decline the application altogether.

The Valuation Process and Why It Takes Longer

You'll need a specialist valuation, not a standard vehicle appraisal. Lenders require written assessments from recognised classic car valuers or clubs affiliated with the vehicle's make or model. This process can take several weeks, particularly if the valuer needs to inspect the car in person.

The valuation determines both the loan amount and whether the lender will proceed. Consider a scenario where you're purchasing a 1969 Ford Mustang Mach 1. The seller is asking $95,000, but the specialist valuation comes back at $82,000 due to non-original parts and minor rust issues. The lender will base the loan on the lower figure, which means you'll need to cover the gap with your own funds or renegotiate the purchase price.

This is where buyers often recalibrate their plans. If you're relying on a specific loan amount to complete the purchase, get the valuation done early. Waiting until after you've committed to a price can leave you scrambling to close a funding gap.

Secured Loans vs Personal Loans for Classic Cars

A secured car loan uses the vehicle as security, which typically means a lower interest rate compared to an unsecured personal loan. However, not all lenders will accept a classic car as security, especially if it's over 30 years old or the loan term extends beyond the vehicle's expected usable life.

When a lender does offer a secured loan for a classic car, the terms are usually more conservative. Loan amounts might be capped at 60-70% of the valuation rather than the 80-100% you'd see for a new or near-new vehicle. Loan terms are also shorter, often five to seven years maximum, which increases your monthly repayment compared to a standard car loan.

If the secured option isn't available or the loan-to-value ratio is too restrictive, an unsecured personal loan becomes the alternative. The interest rate will be higher, but there's more flexibility around vehicle age and condition. You're also not limited to lenders who specialise in vehicle finance, which can open up additional options if your financial profile is strong.

Insurance Requirements and Ongoing Costs

Lenders will require agreed-value insurance, not market-value cover. This means you and the insurer agree upfront on what the car is worth, and that's the amount you'll receive if the vehicle is written off. The valuation you obtained for the loan application becomes the basis for this agreed value.

Agreed-value policies for classic cars are more expensive than standard comprehensive cover. Premiums reflect the vehicle's value, the cost of sourcing rare parts, and the specialised repair work required. For a classic car insured at $80,000, annual premiums in Sydney can range from $1,200 to $2,500 depending on the vehicle's make, your driving history, and where the car is garaged.

Some lenders also require that the vehicle is stored in a locked garage when not in use. If you're in an apartment or a rental property without secure parking, this can become a deal-breaker. It's worth confirming storage requirements with your broker before submitting an application.

Loan Terms, Balloon Payments, and Refinancing Options

Balloon payments are common in classic car finance. A balloon payment defers part of the loan principal to the end of the term, which lowers your monthly repayment but leaves you with a lump sum to pay or refinance when the loan matures.

In a scenario where you borrow $70,000 over five years with a 30% balloon payment, you'll owe $21,000 at the end of the term. If the car has appreciated in value, refinancing that amount might be straightforward. If the market softens or the car's condition deteriorates, you could face a valuation shortfall that makes refinancing difficult.

Balloon payments can work if you're confident in the vehicle's long-term value and you have a clear plan for the final payment. If you're uncertain, structuring the loan with a smaller balloon or none at all gives you more certainty, even if it means higher repayments throughout the term.

Why Some Lenders Won't Touch Classic Car Loans

Most mainstream banks don't offer finance for classic cars because the risk profile doesn't align with their lending models. Classic cars can be difficult to sell quickly if the loan defaults, and valuing them accurately requires expertise that general lenders don't maintain in-house.

Specialist lenders and some non-bank financiers fill this gap, but they're selective. They'll assess your income and credit history more closely than they would for a standard vehicle loan, and they'll often want to see that you have experience with classic car ownership or a demonstrated interest in the collector market.

This doesn't mean approval is out of reach, but it does mean you'll need to present a stronger case. A solid credit file, stable income, and a realistic deposit all improve your chances. If you're also applying for other types of finance such as a home loan or investment loan, timing matters. Submitting multiple applications in a short window can affect your borrowing capacity and how lenders view your serviceability.

When a Broker Adds Value to the Process

Sourcing a classic car loan without a broker means contacting specialist lenders individually, explaining your situation repeatedly, and waiting for responses that may or may not come. A broker with access to lenders who handle classic car finance can shortcut this process by matching your situation to the right lender upfront.

Brokers also help structure the loan in a way that aligns with your broader financial position. If you're planning to purchase the classic car while also managing a mortgage or considering a refinance, a broker can model how the additional debt affects your serviceability and whether adjustments to loan structure or timing would improve your position.

The difference is often in the details. A broker who understands classic car lending knows which lenders will accept a particular vehicle age, how to present the valuation, and what documentation will speed up the process rather than trigger additional questions.

Financing a classic car purchase requires more preparation than a standard vehicle loan, but the structure is manageable when you understand what lenders need and how to position your application. Call one of our team or book an appointment at a time that works for you.

Frequently Asked Questions