Classic Car Finance in the UK: A Collector’s Guide

Why This Guide Matters

Classic cars occupy a unique space in the UK’s automotive landscape—equal parts passion project and potential investment. For many, acquiring a classic vehicle is about more than just motoring; it’s a statement, a hobby, and sometimes, a savvy financial move. Yet the world of classic car finance is often misunderstood. Lending criteria differ from standard car loans, and there are unique risks and rewards to consider. This guide is designed to demystify classic car finance, empowering you to make choices that suit your circumstances and aspirations.

The Basics Explained

Classic car finance operates differently from standard car loans. Lenders assess not only your creditworthiness but also the vehicle’s provenance, condition, and market value. Typically, a car is considered ‘classic’ if it is over 20–25 years old, although definitions vary between lenders.

The two most common finance products available are:

• Hire Purchase (HP): You pay a deposit (often 10–20%) and monthly payments, with ownership transferring to you after the final payment.

• Personal Contract Purchase (PCP): Similar to HP, but with a larger final payment (balloon payment) if you want to own the car outright at the end.

Because classic cars can appreciate or depreciate unpredictably, lenders may require independent valuations and proof of specialist insurance. Interest rates are usually higher than standard car finance, reflecting the niche nature and perceived risks of classic car assets.

How It Affects You

When you choose to finance a classic car, you’re entering a market where value is subjective and influenced by factors such as rarity, condition, and provenance. This means:

• Loan-to-value ratios may be lower. You might need a larger deposit compared to standard cars.

• Repayment terms can be flexible, but higher overall interest adds to the cost of ownership.

• Insurance is critical: Lenders typically require agreed-value insurance and may insist on storage requirements.

• Resale risks: If the market softens, you could owe more than the car is worth (negative equity).

On the positive side, classic cars can sometimes appreciate in value, making them unlike most depreciating assets. However, relying on appreciation to offset finance costs is speculative. The key is understanding that classic car finance is less about convenience and more about facilitating a passion or long-term investment.

Our Approach

At Kandoo, we recognise that collectors and enthusiasts have specific needs when it comes to financing classic vehicles. Our process is built around transparency, flexibility, and specialist knowledge:

• Expert Valuations: We work with recognised classic car valuers to ensure accurate assessments.

• Tailored Lending: Our panel of specialist lenders offers products suited to classic cars, including flexible deposit options and balloon payments when appropriate.

• Personal Service: Every application is handled by a dedicated advisor with experience in classic and prestige car finance.

• Clear Criteria: We help you understand exactly what documentation and insurance are needed, guiding you through each step.

• Post-purchase Support: Our relationship doesn’t end at completion. We offer advice on insurance renewals, refinancing, and what to do if you choose to sell or upgrade your classic in future.

We believe in empowering collectors to enjoy their vehicles without unnecessary financial strain. That means being upfront about the true costs, risks, and potential rewards of classic car ownership.

Before You Decide

It’s wise to ask yourself a few key questions before committing:

• Is this car likely to hold its value or appreciate?

• Can you comfortably afford repayments, insurance, and maintenance?

• Are you buying for personal enjoyment, investment, or both?

• Do you have secure, weatherproof storage?

• Are you prepared for potential repair costs and parts scarcity?

Take time to research not just the vehicle, but its ownership costs. Speak to current owners, join clubs, and read specialist publications. If you’re new to classic cars, consider starting with a model that’s well-supported by enthusiasts and parts suppliers. Remember, the right finance partner will help you navigate these decisions, not rush them.

What’s Real, What’s Hype

Classic cars are sometimes portrayed as guaranteed investments. In reality, the market is cyclical and subject to shifts in taste, legislation, and economic conditions. High-profile auction results can skew perceptions, but most cars experience periods of stagnation or even decline in value.

What’s real:

• Some classics do appreciate, especially rare, well-maintained examples.

• Enjoyment value is a significant part of the equation.

What’s hype:

• Quick profits are rare; most gains are long-term.

• Not every old car is a future classic.

Pros & Cons

Classic car finance opens doors but comes with responsibilities. Consider both sides before making a commitment.

Other Options to Consider

Classic car finance isn’t the only route. Depending on your personal circumstances and the car in question, alternatives include:

• Personal Loans: Unsecured loans from banks or building societies. These don’t require the car as security, but may have lower limits and higher rates.

• Equity Release: If you own property, releasing equity can provide funds, though this puts your home at risk if repayments lapse.

• Savings: Paying cash avoids finance costs entirely, though it ties up capital and may not be suitable for all buyers.

• Leasing: Rare in the classic market, but some specialist firms offer lease options for high-value vehicles.

Each approach has distinct advantages and drawbacks. Personal loans are quick but may not cover the full purchase price. Equity release offers flexibility but carries significant risk. Leasing can offer access to ultra-rare cars for fixed periods, but you won’t own the vehicle.

FAQs

1. Can any classic car be financed? Most lenders have criteria regarding age, value, and provenance. Mainstream cars with limited collector appeal may be harder to finance.

2. What deposit do I need? Deposits typically range from 10% to 30%, although this varies by lender and vehicle.

3. Are interest rates higher than normal car loans? Yes, due to the specialist nature and risk profile of classic cars.

4. Do I need specialist insurance? Absolutely. Lenders usually require agreed-value insurance with reputable providers.

5. What happens if my car loses value? You may end up in negative equity—owing more than the car is worth. This risk is higher with classics due to market volatility.

6. Can I settle my agreement early? Most agreements allow for early settlement, but check for any fees or penalties.

7. What if my classic car is damaged while financed? Comprehensive insurance should cover repairs, but you remain responsible for repayments regardless of the car’s condition.

8. Can non-UK residents access classic car finance? Typically, lenders require UK residency and proof of address, but some specialist brokers can assist international buyers.

Next Steps

If you’re considering financing your next classic, start by researching models and their market trends. Speak with a specialist broker like Kandoo for detailed advice tailored to your circumstances. By understanding both the joys and the responsibilities of classic car finance, you can enter the collector’s market with confidence and clarity.