Commencing the journey of purchasing your first classic car is an exciting moment. As Lending Specialists who are highly experienced in classic car loans, we understand the importance of finding the right finance solution to make your classic car dreams a reality. In this guide, we’ll delve deeper into the key factors associated in loan comparison options for classic cars, focusing on private sale car loans, low-interest rate personal loans both secured and unsecured, as well as low or no-doc car loans.
Private Sale Car Loans
A popular process associated with classic car purchases is a private sale. Unlike typical car purchases from dealerships, classic cars are often bought and sold by individual private owners. Obtaining a private sale car loan requires a slightly different approach than conventional secured car loans. Usually, this is just a difference in documentation required, including registration papers and photos of the vehicle as opposed to a dealership tax invoice.
When comparing your private sale car loan options, consider the following:
1. Lender Flexibility on the vehicle age, and private sales:
- Look for lenders who are flexible and willing to compromise when it comes to private sales. Some financial institutions may have restrictions on private sales of any vehicles, as well as classic cars due to their age at the time of purchase, so it’s important to find a lender that accepts these types of sales and assets before committing to an application with them. Your Lending Specialist at Fox Finance Group will do a comparison of over 50 different loan options to ensure your loan options are best suited towards the asset you are wanting to purchase.
2. Loan Terms:
- Classic car loans can be arranged on a variety of different loan terms, allowing borrowers to be in control of how much they can afford to repay on a regular basis. Your Lending Specialist will be able to evaluate the loan terms with you to ensure they align with your financial goals and capacity.
3. Interest Rates:
- Interest rates for private sale car loans will vary based on the lender and what rate tier you qualify for based on your overall profile. Factors that will contribute to the rate tier that you qualify for may include but not be limited to employment status, income, residential history, credit score, and pre-existing assets and liabilities. Making sure that all available loan products and their rates are compared against one another is integral to ensuring you get the most competitive finance option. In some instances, the lowest interest rate may not necessarily mean it is the most cost-effective solution for an individual. For example, some lenders may offer loan products with a slightly higher interest rate than others on the market, but due to being able to offer a longer term with less fee’s, this works out to offer the customer lower repayments that meet their budget.
Low-Interest Personal Loans
Another option worthwhile considering when purchasing a classic car is a low-interest rate personal loan. These loans provide flexibility and can be used for various purposes. Some classic car purchases require the vehicle to be modified or repaired to meet a roadworthy standard or the purchasers goals. In these instances, personal loans allow the funds to be disbursed directly to you, for you to then spend as you see fit. Something else to consider is personal loans and the rates offered are based off the applicant’s overall profile rather than also factoring in the asset being purchased and its age. For classic car finance this can be advantageous, as these vehicles are normally outside of 10 years old, which most lenders will view as a risk, and as a result offer a higher rate for. On the other hand, in some instances a personal loan can offer a customer a lower rate and better deal than more traditional secured options if they have a stronger profile in the lenders eyes.
Personal loans have a variety of different product options including:
1. Unsecured vs. Secured Loans
- Low-interest rate personal loans can either be secured or unsecured. Secured loans require collateral, such as a pre-existing vehicle (in most cases), or other assets worthy of a certain value. Unsecured personal loans do not require securitisation of any asset to disperse the funds into your bank account. It’s not uncommon for interest rates to be slightly higher for unsecured personal loans as opposed to secured personal loans, because the lender is taking a higher risk by offering funds without any collateral to repossess in the event of a customer defaulting. The lending market frequently changes to cater for consumer appetite, and to compete with other lenders and promotions. So it is worthwhile taking the time to consider your needs and what commitment you can make when delving into secured and unsecured personal loan products for the purchase of a classic car.
2. Establishment Fees
- Almost every lender in the market has an establishment fee for the process of commencing the facility. These fees are separate to any origination fee that a brokerage may charge for their services. Every lender is different, and as a result applies different fee’s, but some examples of different fee’s you may find when comparing options across lenders are monthly fees, risk fees, and delinquency fees in the event of a missed repayment. Most of these fees are included in the borrowed amount and financed over the term of the loan, which means they directly impact the cost of the repayments being made over the life of the loan. As mentioned earlier, it comes down to what is most important to an applicant to achieve their finance objectives. Some lenders may charge a high establishment fee, but offer a low-rate product, and vice versa. Establishment fees are something applied by almost all lenders, however the other fee’s discussed previously can vary widely between lenders and ever their own individual products they offer.
3. Credit Requirements
- When it comes to personal loans to purchase a classic car, your credit score can play a crucial role in determining your eligibility for various different loan products and their tiering. Checking your credit score safely through a reputable credit reporting agency will help prepare you before submitting a classic car loan enquiry. You are eligible for one free credit report per year through Equifax. Being able to discuss your credit score with your Lending Specialist will give you excellent clarity and insights as to what tier you will qualify for with each eligible lender.
Low Doc Classic Car Loans
For those with self-employed income, low and no-doc car loans can be an option to consider when purchasing a classic car. These loans often require minimal documentation, hence the name. These are accessible for business owners and directors, and self-employed workers such as sole traders and registered partnerships.
It’s important to consider your needs and what loan product aligns best with them, including low or no-doc loans. Some considerations to factor in are:
1. Income and Overall Profile Criteria
- Low and no-doc loans are only eligible for applicants with commercial and business income, meaning you will have to have a registered ABN or ACN for the minimum amount of time that the lender requires. You will also be required to have valid identification to prove your Australian residency. Forms of identification that are most often required are a drivers’ licence and Medicare card. Most lenders will conduct searches on the business history to ensure they are confident in your income stream within your industry. Lenders will also in most scenarios require the applicant to either own property, or have a minimum deposit to contribute towards the purchase of the vehicle of 10%.
2. Loan Approval Time
- One of the main advantages of low doc loans and no doc loans is their efficient turnaround times for approval and settlement. As little to no documentation is required for the assessment, permitted all business information is verified and accepted, a low doc classic car loan could be approved in as little as 24 hours.
3. Business Purpose
- As mentioned above, low and no doc loans are only eligible to those receiving business income. Due to the product being commercial, it is integral to ensure that the lender is aware your classic car will be used for business purposes. Discussing your business plans with your dedicated Lending Specialist will allow for the best submission possible, with your broker being able to explain to the lender how the purchase is relevant to your business, as well as being able to source specific lenders that specialise in financing classic cars under a business name.
In conclusion, choosing the right loan option for your classic car purchase involves a thorough understanding of your financial situation, preferences, and which sale route you are going to take. Whether you opt for a private sale classic car loan, a classic car purchased with a personal loan, or the help of a low or no doc loan through a business, careful comparison is key to finding the best solution for you.
As a local finance brokerage dedicated to helping Australians begin or add to their classic car collection, we’re always available to discuss your loan objectives. The road to classic car ownership should be as enjoyable as cruising around in your vintage wheels. Give our friendly team a call today on (07)3505 3099, or have us call you.