How Does Classic Car Financing Work?

In this practical guide, we’ll answer all your questions about how classic car financing works. We’ll unpack how classic car loans work, break down the application process and explore the different financing options available in the UK.

Understanding classic car financing

How does classic car financing work compared to standard auto loans? While the pair share many similarities, it’s important to understand the differences between the two. Classic car loans are designed with vintage automobiles in mind, which means there are some unique factors that come into play:

Age

In general, a car must be at least 15 years old to be considered a classic. This is the age cited by HMRC in the official definition of a classic car.

Vintage appeal

While cars become eligible for classic status at 15 years or older, lenders also factor in vintage appeal. Vehicles from the post-war era, like the much-loved Morris Minor and iconic Aston Martin Atom, are generally favoured by lenders. That said, it’s not unusual for exceptions to be made for exceptionally rare or unique models.

Condition

The overall condition of cars plays an important role in securing finance. For example, lenders are far more likely to finance a Morgan Plus 4 roadster in mint condition than the same model in need of serious work.

Documentation

Lenders won’t always take your word for it when it comes to factors like age and condition. This is where documentation comes in useful. Anything related to the vehicle’s background, service history and overall vintage appeal can help improve your chances of securing classic car finance.

Market value

Lenders will usually assess the market value of the classic car before extending financing. Potential appreciation may also be considered. Typically, lenders will want to see a value of at least £15,000. Factors like condition, rarity, historical significance, documentation and desirability can all influence the appraised value of the car and ultimately, eligibility for finance.

Classic car financing options

Now you know more about how classic car financing works, let’s take a closer look at some of the different payment plan options available in the UK. Like standard auto loans, classic car finance agreements are designed to cater to different needs and preferences.

Hire Purchase (HP)

Simple and easy, HP agreements start with an initial deposit followed by fixed monthly payments to repay the total purchase price of the classic car, plus interest. When the contract is complete and the loan is fully paid off, legal ownership of the vehicle transfers to the driver. The HP model essentially sees the lender purchase the car outright, then provide the borrower with a structured payment plan.

Personal Contract Purchase (PCP)

Lower monthly payments make PCP one of the most popular ways to finance a classic car. Instead of covering the total purchase price of the car, monthly payments cover the cost of renting the vehicle from the lender for a set period, generally three to five years. At the end of the contract, you have the option to make a ‘balloon’ payment to cover the remaining value of the vehicle and purchase the car outright. Alternatively, simply return the vehicle to the lender, as long as the vehicle is in good condition, in line with the contract terms and within the agreed mileage.

Personal Loans

How does classic car financing work for a personal loan? This option sees lenders extend lump-sum financing to cover the full purchase price of a classic car. As well as the total purchase price, monthly repayments factor in interest and other fees.

Get behind the wheel of a classic with My Car Credit

Ready to embrace the joys of vintage motoring? At My Car Credit we specialise in securing auto finance loans for all kinds of vehicles, including classics. Give our online finance calculator a try and find out how My Car Credit can help you obtain that classic car of your dreams.