Financing for older cars
When you’re trying to decide between a brand-new car and an older model, there are several advantages to choosing a car with a few years on the clock.
Used cars can offer great value for money (and there’s nothing better than a bargain) and tend to depreciate at a slower rate so can even be a prudent investment.
And if you’re hoping to buy your next car on finance, the good news is that most lenders will offer finance on used cars.
However, older isn’t always better.
Once your car reaches double-figures it starts to be seen as a riskier prospect (think DiCaprio and a 25 year old). It’s likely sporting some wear and tear that it’s picked up over years of loyal service, vital parts might start needing to be replaced, and it doesn’t have the latest tech and safety kit that can help it fetch a better price on the resale market. These factors can leave many lenders more reluctant to finance a car that’s over 10 years old.
But what about classic cars?
If you’ve got your eye on a vintage model that’ll be the star of your classic car collection, don’t panic; you might still be able to find car finance, but it will likely be with a specialist lender. You’ll need to find a lender who understands the classic car market and can value your car appropriately (someone who knows their DB5s from their E-Types).
Ready to learn more? Here’s everything you need to know about financing an older car:
Can you get finance for older cars?
When it comes to finding finance for an older car, age matters.
While buying a used car can help you bag a bargain, the older a car gets, the more likely it is that you’ll run into issues.
Different lenders have different upper age limits: some will only finance cars up to 10 years old, some will stretch that to 12 years, and others will even consider cars that are 15 years old.
Keep in mind that the car’s age isn’t the only factor that lenders consider when deciding whether to offer you a loan. They’ll also look at things like:
- The car’s total mileage
- Its condition
- Its value
- Who is selling the car
- How much it’s being sold for
- The size of your deposit
- Your credit score
When they weigh up all these different factors (and more), the lender might be more willing to offer finance for you to buy an older car in great condition with a low number of miles on the clock than a newer model that has done over 100,000 miles and hasn’t got much resale value.
Why do lenders care about the age of a car?
Lenders can definitely have an age bias when it comes to cars. While older cars can still be great buys, they come with more risks. It’s a piece of machinery, after all, and it’s bound to wear out eventually.
For lenders, it’s all about the risk and the resale value. As cars get older, it becomes more likely that parts will fail, the mileage will be higher and that they won’t have the latest desirable tech and safety features. Each of these factors can contribute to these cars being valued less favourably if they were required to resell the vehicle at a later date, making it a riskier bet for lenders.
There is a sweet spot; a used car that’s four or five years old, for example, may still be available at a lower price than a brand-new model (and it’ll have already gone through the fastest years of depreciation) but will likely come with fewer miles on the clock than an older model and be less likely to face mechanical issues.
Is there a maximum age Carmoola will lend against?
Here at Carmoola, we’re happy to help you find finance for a wide range of different cars, but we do have a few restrictions, including:
- You’ll need to buy your car from one of our 8,000+ approved dealerships rather than a private seller
- The car you choose should be less than 12 years old by the end of your agreement
- It must also have less than 100,000 miles on the clock
No matter the car you choose, we’ll help you get that extra peace of mind by running a full vehicle history check before you buy. That means you’ll find out upfront whether it has any issues that could impact its long-term value.
How can I finance my older car?
No matter the age of your car, as long as it’s not a classic, getting finance will likely follow a similar process. You will usually be looking at either a Hire Purchase (HP) or Personal Contract Purchase (PCP) deal.
With HP, you’ll be working towards car ownership. This means your monthly repayments might be slightly higher than other options but, once you’ve made all your payments and covered the (typically small) Option to Purchase admin fee, it’ll be all yours!
In contrast, PCP gives you options. You’ll only borrow an amount equivalent to the value that the lender thinks your car will lose over the loan term in depreciation.With an older car that depreciates slowly, you might not need to borrow as much as you would with HP, as typically they’ll be hit with less depreciation than a brand-spanking new vehicle will over the first couple of years. At the end of the loan term, you can either buy the car by paying the outstanding balance (known as the balloon payment), hand it back to the lender, or use any available equity as a deposit in your next deal.
It all starts with an application. Your eligibility will be based on a range of factors including your own personal details and financial circumstances as well as the car you want to buy. When you want to buy a car that’s towards the upper limit of the lender’s age criteria, you might need to double-check the terms of the agreement and be prepared for the lender to take some more time with its checks as the car will likely have more damage from wear and tear to assess.
How can I finance my classic car?
Classic car finance can work a little differently than standard used car loans. That’s because it’s a specialist car and so often requires a lender with knowledge of the specialist market.
With most classic car specialist lenders, you can get both HP and PCP finance. Your eligibility will depend on the lender’s criteria and your credit score (among other things) and it’s worth keeping in mind that the additional maintenance associated with classic cars might factor into your affordability checks.
It could also be useful to note that some lenders in this space offer equity release finance. As your classic car is an asset, this type of finance allows you to release some of the value held in the vehicle as a lump sum and then make monthly payments to repay it.
FAQs about financing older cars
What qualifies a car as a ‘classic’?
Unfortunately, the term classic car is subjective – and people have different definitions.
If we go with the HMRC’s official answer (as classic cars are taxed differently), a car becomes a classic when it’s over 15 years old and worth at least £15,000.
However, in the wider car industry there’s no set age or value that makes a car classic rather than simply old.
Generally speaking, a car becomes classic when it’s a model that’s no longer manufactured but still desirable. It should also be in good condition, relatively rare, and popular among collectors.
While vintage cars are models made before 1930, you could also define some cars as modern classics such as the Audi TT or Smart Fortwo.
Does it cost more to insure an older car?
On the other hand, used vehicles can sometimes be missing modern safety features, which could make them more of a risk for insurers.
Other factors will also affect the cost of your car insurance, ranging from the number of miles you drive and where you store the car to how old you are and what you do for work.
Classic cars can cost more to insure if your model might need specialist or imported parts to be repaired. In that case, you may be better off with a specialist policy.
