Thursday July 28, 2016
David Lofts looks at the benefits and potential pitfalls of financing a classic car.
It’s never easy to walk past a dream car in a showroom, knowing that however much you admire and covet that stunning (insert your dream car here) there will always be an obstacle to ownership - whether lack of garage space, practicality, two seaters being too small for children, marital pressure or a simply lack of finance.
It’s not so much of an issue for those ‘in the know’ however. So prepare to extend the garage, hire a nanny and have a chat with one of the numerous specialist finance houses who share your passion for classic cars.
With the increase in classic car values reported over the last ten years this could be just the time to be considering a new purchase, and with low interest rates and recent gains, financing a classic over three years at a reasonable APR rate could pay serious dividends over ten years.
Classic car finance isn’t going to be as cheap as going to the bank or a finance company to arrange a loan for a new VW Golf, and the APR you’ll pay will probably be higher than a high street bank, but with interest rates as low as they currently are even a five percent increase over the base rate isn’t going to break the bank.
There also seems to be a bit of a trend emerging among smaller collectors and enthusiasts to use one classic to finance another, and thereby build a small classic portfolio via the kind of Equity Release schemes that buy-to-let landlords were exploiting about ten years ago. Beware though. Market forces in property pushed many of these would-be property barons into negative equity, and if interest rates go up, so does the cost of your car.
Take a typical 3.0 litre Healey as an example. With an agreed valuation at say £30,000, if the car doesn’t owe you money, i.e it’s HPI clear and you don’t still owe your Dad for the loan, you can release the equity in the car, by putting it up as collateral against a loan, to buy another one.
We’re also seeing some renewed interest in left-hand-drive classics, which may just potentially be a knee-jerk reaction to Brexit and the possibility of making a killing in the EU by selling their heritage back to them, but it’s an interesting move nonetheless.
It could also be the case that the more astute, money-minded collectors and dealers are hoping to take advantage of an appallingly weak Pound.
If you’re going on holiday to Benidorm or doing business in Brussels this is bad news for you on the exchange rate front, but if you’re selling a classic or two back into Europe or the US the buyer is going to get an incredible deal, because his Dollar or Euro is worth so much more.
Easy Does It.
Like lapping in valves on your engine, it takes some careful consideration, and if you’re not 100% sure of what you’re doing it’s always best to take it easy and not push too hard in case something goes wrong.
Personally I’d stop at taking the rocker cover off and removing the plugs then get a grown-up to help me with the tricky bit, so if you’re of a cautious nature the best way forward is to ask an expert.
There are a number of specialists in the sector, including some of the mainstream financial services businesses, but as with classic car insurance, we’d always recommend talking to specialists among the niche or enthusiast companies, who will undoubtedly have a better understanding of what you’re looking to finance.
If you research your finance company as carefully as you’d research investing your hard earned cash in a new classic you can’t go far wrong, and as ever, the internet is your friend -
and a good first port of call for anyone wanting to get their hands on something a little more exotic than their bank manager might necessarily approve of!
David Lofts is Marketing Manager at Lancaster Insurance and a self-confessed serial classic car buyer. He is currently thinking about selling his children and taking out a mortgage on a Bristol 411 S1.