Everything You Need to Know About Classic Car Loans

Classic cars are more than reliable transport. They are investments, projects, and sometimes the result of years of waiting for the right vehicle at the right price. Financing one requires a different approach to a standard new car loan, and lenders assess them differently too.

How Classic Car Loans Work Differently

A classic car loan is a secured loan where the vehicle acts as security, but lenders treat older vehicles as higher risk. Most lenders cap the age of a vehicle they will finance at 10 to 15 years, which rules out most classics. The loan amount is also influenced by the valuation process, which is less standardised than it is for newer models. Where a dealer invoice or manufacturer's price list sets the baseline for a new car, a classic may need an independent appraisal from a specialist to confirm market value. That appraisal becomes the starting point for how much you can borrow.

Consider a buyer who finds a 1970s Ford Falcon in good condition advertised at around the current market rate for similar models. The lender arranges an appraisal through a recognised classic car valuer, and the report comes back with a conservative figure slightly below the asking price. The loan amount is then based on that appraisal, not the advertised figure. If the buyer has a 20% deposit based on the appraised value, they avoid the need for lender's mortgage insurance (which is rarely available for classics anyway) and the application moves forward. Without that independent appraisal, the lender would decline the loan outright.

Interest Rates and Loan Terms for Classic Vehicles

Interest rates on classic car loans sit higher than those for new vehicles. Lenders price in the uncertainty around resale value, the difficulty of liquidating the asset if repayments stop, and the risk that repair costs could push the borrower into financial pressure. Loan terms are also shorter. Where a new car loan might stretch to seven years, a classic is more likely to be approved over three to five years, which increases the monthly repayment amount but reduces the total interest paid.

Some lenders offer a balloon payment structure, where a large lump sum is deferred to the end of the term and monthly repayments are reduced. This can work if you plan to refinance or sell the car before the balloon is due, but it also means you carry a larger debt balance for longer. The interest accumulates on that balloon amount, so the total cost of the loan increases.

Finding a Lender Who Will Finance a Classic

Not all lenders will finance a classic car, and those that do often require the vehicle to meet certain conditions. Some insist the car has been restored to roadworthy condition and will require an engineer's report or a recent roadworthy certificate. Others will only lend if the car is registered and insured with an agreed value policy, which covers the appraised value rather than market value at the time of a claim. A small number of specialist lenders focus entirely on classic and collectible vehicles, but their loan amounts are often capped and their serviceability criteria can be stricter.

ADF members have access to lenders who understand irregular income patterns, deployment schedules, and allowances that don't always appear on a standard payslip. That same flexibility can apply to a classic car loan, but the vehicle still needs to meet the lender's age, condition, and valuation requirements. If the car is a project vehicle that is not yet roadworthy, most lenders will decline the application until the work is complete and the car is registered.

Deposit Requirements and Borrowing Limits

A deposit of at least 20% is standard for a classic car loan. Some lenders require more, particularly if the vehicle is rare, unrestored, or difficult to value. The deposit demonstrates commitment and reduces the lender's exposure if the car depreciates or if resale becomes difficult. Borrowing limits vary, but most lenders cap the loan amount at a level where the monthly repayment remains sustainable even if your income fluctuates.

If you are considering a classic car alongside other financial commitments, a loan health check can clarify how much room you have in your budget before you commit to the purchase. Lenders assess your total debt position, not just the car loan in isolation, so existing mortgages, personal loans, and credit card balances all factor into the decision.

What Happens if the Car Needs Work After Purchase

Classics often need ongoing maintenance, and some require significant work shortly after purchase. If you plan to finance both the car and the restoration, some lenders will roll those costs into the loan amount, but only if the work is documented with quotes from recognised mechanics or restorers. Without that documentation, the lender may approve the car purchase but decline the additional funding for repairs.

In a scenario like this, a buyer locates a 1980s Holden Commodore that is mechanically sound but needs interior work and paint. The buyer obtains quotes from two restoration shops, and the total cost comes to around a realistic estimate for that type of work. The lender agrees to include the restoration costs in the loan amount, provided the work is completed within six months and the buyer provides receipts and photographs. The loan is structured over four years, and the buyer arranges agreed value insurance once the restoration is finished. The vehicle is then reassessed by the insurer, and the policy is updated to reflect the improved condition.

Insurance and Ongoing Costs

Agreed value insurance is a condition of most classic car loans. This type of policy locks in a value that you and the insurer agree on, rather than relying on market value at the time of a claim. If the car is written off, you receive the agreed amount, which should be enough to pay out the loan. The premium is usually higher than comprehensive insurance on a standard vehicle, and some insurers impose mileage limits or require the car to be garaged when not in use.

Running costs for a classic can be unpredictable. Parts may be difficult to source, labour rates for specialist mechanics are higher, and fuel economy is often poor compared to modern vehicles. Lenders do not factor these costs into the loan assessment directly, but they do assess your overall budget to confirm you can manage the repayments alongside those ongoing expenses.

When Refinancing or Selling Makes Sense

If the value of the car increases or if interest rates drop, refinancing the loan can reduce your monthly repayment or shorten the loan term. Some lenders allow you to refinance a car loan if the vehicle has been revalued and the new appraisal supports a lower interest rate. Selling the car before the loan term ends is also an option, but you need to pay out the remaining balance before the buyer takes ownership. If the sale price is lower than the loan balance, you will need to cover the shortfall from your own funds.

Call one of our team or book an appointment at a time that works for you. We work with lenders who understand ADF income structures and can assess classic car loans based on the vehicle's condition and your specific circumstances.

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