Classic car ownership may be a day-to-day reality for many, but for those looking to buy for the first time using finance, trade up to another model or release equity in their car for other purposes, it can be a minefield. With so many companies, agreements and terms, we talk to the experts at Classics & Sports Finance about how to borrow money to buy a classic or historic motor car.
Classic & Sports Finance’s Managing Director, Rob Johnson, has been in the business for over two decades and says the key to buying a car on finance is to get the right advice and agreement. “We’ve been doing this for over 20 years, have helped thousands of customers find funding that’s right for them. I’ve seen so many enter into a finance agreement that isn’t suited to that specific person, car or situation. It’s really simple – select what’s right for you and not the lender of the money.”
In this brief guide we look at the simple steps and areas to be aware of when financing a classic car.
There are really three key points. The right car, the right price and from the right people.
“It’s a bit like buying a house,” explains Rob. “It’s a large purchase and there are many considerations that you might need to think about. Is it priced correctly? Am I buying it from a well-known supplier or seller? Is it fit for purpose and an honest example or does it need significant work to make it the true market value? Are there any potential legal issues, such as does the owner have good title? Is the car what it is purported to be?”
Thinking about the way out, on the way in, when you’re buying any car is a crucial factor. Should your circumstances unexpectedly change or you need to sell the car in favour of a better project, for example, will the numbers stack up? And will it be as easy to sell as it was to buy? Does it have relevant history, provenance and good and clear title? Think about the questions you could be asked when selling, that you too should be asking now.
Once you’ve found your car at the right price and think you’ve got the right people involved, it pays to do some extra homework. It’s always good to get a second opinion either from an independent valuation expert or even owners’ clubs and members related to that specific marque or model.
Rob told Footman James, “Some dealers have been working with particular makes and models for decades. You can never underestimate their knowledge. Established minds will go the extra mile to make sure you’re buying and financing the right car for you.”
There are two main types of finance agreements – regulated and unregulated. Rob explains why regulated agreements are preferable for consumers rather than unregulated finance products, which are targeted at HNW (high net worth) individuals and corporate entities.
“Regulated agreements are designed around the average consumer. They have more security, are regulated by the Financial Conducts Authority (FCA) and put the onus on the lender to fully educate the consumer on their responsibilities and rights under this agreement. There are many lenders signing the average person into unregulated agreements (using certain clauses) who simply don’t understand what they are entering into and their position when it comes to settling the agreement early or making over payments. Security and flexibility are all factors a regulated document offers."
“Of course, unregulated agreements have their position in the market, they’re better suited to those who are commercially minded, typically HNW individuals and businesses. They often contain variable interest rate profiles, which may be suited to their purchase better. That said, it’s assumed that they understand what they are entering into even if it has hasn’t been explained to them thoroughly, compared to the general consumer with little experience of finance products.”
Overall, you should never feel pressured or unclear during any element of a buying process. Purchasing a car or releasing equity from something you currently own shouldn’t be laborious – it should be a fun and exciting journey. That’s why working with the right people every step of the way is key.