Do you know how classic car finance really works?

Classic cars sit in a category of their own when it comes to finance.

Lenders treat them differently to new or used vehicles because the risk profile changes when the asset is decades old, potentially appreciating in value, and not always used as everyday transport. Understanding these differences before you start looking seriously at a purchase means you'll know what's realistic, what documentation you'll need, and which lenders are worth approaching.

How lenders assess classic car finance applications

Lenders evaluate classic car applications based on the vehicle's condition, provenance, and market demand rather than a standard depreciation schedule. A 1970s Holden Monaro or a Mercedes-Benz SL from the 1980s may hold or increase in value, which changes the security position for the lender compared to a car that loses 15% of its value the moment it leaves the showroom.

Valuation becomes central to the approval process. Most lenders require an independent valuation from a specialist in classic or collectible vehicles, and that valuation determines how much they're willing to lend. The loan amount is typically capped at 70% to 80% of the agreed valuation, which means you'll need a larger deposit than you would for a standard vehicle purchase. Some lenders also ask for proof that the vehicle will be garaged and insured under an agreed value policy, because the security needs to be maintained throughout the loan term.

Consider a buyer looking at a restored 1965 Ford Mustang valued at $80,000. With a lender willing to finance up to 70%, the loan amount would be $56,000, requiring a $24,000 deposit. The lender also requests a condition report and evidence of comprehensive insurance with an agreed value that matches the valuation. The finance approval depends as much on the quality of the restoration and the vehicle's documented history as it does on the buyer's income and credit profile.

Interest rates and loan terms for collectible vehicles

Classic car finance typically carries a higher interest rate than a new or late-model used car loan. The difference might be one to three percentage points, depending on the lender and the vehicle. Loan terms are also shorter, with most lenders offering a maximum of five to seven years rather than the seven to ten years available for newer vehicles.

The reason comes down to how lenders manage risk. A classic car may appreciate, but it can also become difficult to sell quickly if the borrower defaults, particularly if the vehicle is rare or requires specialised knowledge to value accurately. Shorter loan terms and higher rates reflect that uncertainty. Secured car loans for classic vehicles are still more affordable than personal loans, but you won't see the same rates advertised for electric vehicles or certified pre-owned models from major manufacturers.

If you're comparing finance options, expect monthly repayments to be higher than they would be for a newer vehicle at the same purchase price, both because of the rate and the shorter term. A $60,000 loan over five years at a rate reflective of classic car lending will have a significantly higher monthly repayment than the same amount borrowed over seven years at a lower rate for a late-model car.

Deposit requirements and genuine savings

Most lenders expect a deposit of at least 20% to 30% for classic car finance, and they'll want to see that the deposit comes from genuine savings or the sale of another asset rather than a gift or short-term loan. This requirement exists because the lender is assessing both your ability to service the loan and your commitment to the purchase.

In Adelaide, where the classic car community is active around events like the Bay to Birdwood and vehicles are often sourced through specialist dealers in the inner suburbs or private sales in the Adelaide Hills, buyers also need to budget for pre-purchase inspections, registration transfers, and sometimes transport costs if the vehicle is interstate. These expenses sit on top of the deposit and need to be factored into your overall borrowing capacity.

If the vehicle you're purchasing is being sold by a private seller rather than a dealer, some lenders will ask for additional documentation such as proof of ownership history, service records, or evidence that the vehicle is registered and roadworthy. Dealer financing is rarely available for classic cars in the same way it is for new vehicles, so you'll usually be working directly with a lender or through a broker who has access to car loan options across multiple institutions.

Balloon payments and how they affect the loan structure

A balloon payment can reduce your monthly repayment by deferring a lump sum to the end of the loan term, but it also means you'll owe a significant amount when the loan matures. Some buyers use a balloon payment structure when they expect to sell or refinance the vehicle within a few years, or when they want to keep repayments lower while holding the car as part of a broader collection.

If you choose a balloon payment, the amount is typically between 20% and 40% of the original loan amount, and it's due in full at the end of the term. You can refinance the balloon, pay it out, or sell the vehicle to cover it. The challenge with classic cars is that the resale value at the end of the loan term isn't predictable in the same way it is for a standard vehicle, so you're taking on more risk if the market softens or the vehicle doesn't appreciate as expected.

In a scenario where a buyer finances a 1980s Porsche 911 with a $50,000 loan, a 30% balloon payment, and a five-year term, they'll have lower monthly repayments across the five years but will owe $15,000 at the end. If the vehicle has appreciated and is worth $90,000 at that point, selling it to clear the balloon and realise a return makes sense. If the market has cooled and the vehicle is worth $70,000, the buyer has less flexibility and may need to refinance or hold the car longer than planned.

Insurance and ongoing costs as part of the finance conversation

Lenders financing classic cars will almost always require comprehensive insurance with an agreed value that matches or exceeds the loan amount. Agreed value policies are more expensive than market value cover, but they protect both you and the lender if the vehicle is written off or stolen. The cost of insuring a classic car in Adelaide varies depending on the vehicle's value, how often it's driven, and whether it's kept in secure storage.

Ongoing maintenance and parts availability also matter, particularly if you're financing a vehicle that's rare or imported. A classic Jaguar or Alfa Romeo might need parts shipped from overseas, and labour costs for specialist mechanics can be higher than for modern vehicles. These aren't costs that affect your finance approval directly, but they do affect your ability to service the loan comfortably, and a broker will usually ask about them when assessing whether the loan structure suits your circumstances.

If you're looking at asset finance more broadly or considering whether a classic car sits alongside other investments, the conversation often extends beyond the vehicle itself to how it fits within your financial position and goals. Classic cars can appreciate, but they're not liquid assets, and lenders account for that when structuring the loan.

How a broker helps with specialist vehicle finance

Not all lenders offer finance for classic cars, and the lenders who do have different criteria around vehicle age, condition, and use. A broker with access to car loan options from banks and lenders across Australia can identify which institutions are willing to finance the specific vehicle you're considering and what terms they'll offer.

The car loan application process for a classic vehicle involves more documentation than a standard purchase, and having someone who understands what each lender needs upfront reduces delays. Brokers also help structure the loan in a way that suits how you plan to use the vehicle, whether that's occasional weekend drives, attendance at events, or display as part of a collection. If you're also looking at refinancing other debts or reviewing your broader financial position, a broker can bring those conversations together so the classic car purchase doesn't sit in isolation from your other commitments.

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