As finance for classic car s becomes more accessible in the UK, should consumers expect rates to match the best offers from the mass market?
Over the past few months an increasing number of customers are saying to us “I think I can get a better rate” and you’ll probably be surprised to hear that this is a statement we love hearing. We love hearing it because the truth is that our finance rates are as competitive as they come and in general terms they may be able to get a cheaper car finance rate, but not on a classic car and often they are unable to arrange a suitable finance package anywhere else.
Let’s put this in perspective. In the 2008 credit crunch it became virtually impossible to borrow money against any relatively expensive new car, let alone a classic. At franchised dealer showrooms cars began to pile up as the owners that had ordered them were unable to secure finance as the high street lenders withdrew from the market. Not long afterwards, car lovers began to buy classic cars as tangible assets – they were seen as a safe (and fun) place to put their money when nothing else was giving them a return.
At this point Classic & Sports Finance already had the relationships, expertise and facilities in place to fund these classics at a time when pretty much no-one else could and since the credit crunch we have arranged funding for well over £100 million of cars. As the recession continued and the UK new car market shrank, manufacturers needed to find a way to stimulate sales and they did this by offering low rate finance deals which they subsidised – which is why now approximately 80% of new car sales in the UK are now financed.
Cheap car finance is now part of the landscape of buying a new car – but if you remember back to the the late nineties most people would have thought that an APR of 15% was pretty reasonable. We are now all programmed to expect unbelievably low rates of finance, but the reality is that these are subsidised by manufacturers for a reason – to sell more cars. In terms of risk to the lender, new car values are also far easier to predict which has an impact on the rate. Clearly these factors do not exist in classic car finance – so how can you get the best rate?
The reality is that it is only relatively recently that lenders have come back into the market for classic car finance and securing it is not that easy – we just make it seem that way. Classic & Sports Finance regularly get referrals from finance companies that offer classic car finance but are unable to secure a deal for their client. Our experience means that we profile deals in the best possible way and present them to the lender in a way that they will fully understand and one that will motivate the underwriter. It is not uncommon for an underwriter to reject a deal if it is incorrectly presented and more often than not there is no second chance – so you need to get it right first time. Residual values and the lender’s confidence in them play a major part in a successful deal, which is why we invest so much time and effort in understanding and predicting the classic car market values – something we lead the industry in.
The best rates come from profiling and presenting each deal correctly first time, every time to the premier league of lenders who specialise in funding classic cars. With increased competition, some brokers are suggesting to customers that their finance has been “pre-approved” – this is misleading because there is no such thing; finance approval only comes after a finance proposal has been submitted to the lender and if they get this wrong your chance of securing funding may be scuppered. A good rule of thumb is that if a broker doesn’t sound like they know what they are talking about , they probably don’t….
At the end of the day manufacturer supported new car finance deals will always look cheaper on paper than a classic car loan – the big difference is that the value of your new car will be going down fast….. Classic car finance rates are genuinely competitive at the moment, just don’t expect them to sound quite as cheap as your local new car dealer.
Postscript – 25/3/2015
We got a timely call from Classic Car Weekly today to get our thoughts on LLoyds Bank entering the classic car finance market. They later told us that the maximum vehicle age at the end of the agreement was just 14 years old.
Alternative funding sources
To put rates in perspective you could try one of the following alternatives to classic car finance.
Bank overdraft – 15-25% EAR
Credit card – 15-40% EAR
Picture credit: Citroen UK