Everything You Need to Know About Classic Car Financing in the UK By Charlotte Iggulden Classic cars provoke strong, emotional reactions in car enthusiasts and casual onlookers alike. Owning a classic car can be incredibly rewarding; not just for the monetary value, but rather for the pleasure of driving a historical vehicle that has a unique character. My family has always had an interest in all things automobile-related, especially classic cars. Over the years, my father has owned numerous distinctive classic, sports, and American muscle cars, such as the Ford Mustang Mach 1 and Camaro Z28. Everyone should have the opportunity to own their dream car once in their life. To shed light on the kind of thorny obstacles that may make the acquisition and upkeep of a classic car difficult, this article discusses the best way to finance your classic car project, by looking at the various classic car finance options in the UK. Also featured is David Iggulden (DCI), committed family man and petrol head, with useful tips for keeping costs down. Are Classic Cars a Good Investment? In the UK, a classic car is generally accepted to be over 40 years old. It is also of sufficient historical and cultural interest to have an appreciating value and is worth preserving or collecting. With UK interest rates so low, now is a good time to invest in a classic car. Its price will depend on a combination of factors, such as age, mileage, brand, model, and condition. Hagerty’s market trend index for classic cars indicates that sports cars, antiques, classics and muscle cars will eventually earn you money, as opposed to buying a new car which might depreciate in value. Classic cars can even be quite affordable, starting from a few thousand pounds or dollars. However, they can rise to tens of thousands or even millions, particularly at auction, depending on the make and model, which shows their continued desirability. Occasionally, some classics will have been kept for a considerable amount of time in inadequate storage facilities without appropriate climate control or maintenance, resulting in their poor condition. Referred to as ‘barn finds,’ they tend to be discovered in outbuildings, or quite literally in a barn. Restoring a project car to its former glory can be like rediscovering it, but as expensive as it is satisfying. You may be fortunate to unearth treasures like the very rare 1954 Aston Martin DB2/4 MK II coupe, which in spite of its condition sold for six figures in 2018, or you could find a beautiful 1937 Bugatti Type 57s Atalante coupe, which still sold for over $3 million in 2009. A 1969 Dodge Daytona Charger was found on an Alabama farm, rust-free, and sold for six figures at Mecum Auctions in 2016. Classic Car Financing DCI: “There is always something to be done on a classic car; if you’re not careful, it could run into thousands. Unless you have an unlimited budget, it could be very costly. Replacing one part could become a whole-body restoration. There’s a saying: it’s ‘only original once,’ especially after spraying etc. You should try to keep it original, which will also help maintain its investment value.” Financing is the process of financially supporting your classic car purchase or providing funds to your project, whether you are a first-time buyer or seasoned collector. You can buy classic cars through dealers, private sellers, or at auction. You can pay for your car and its continued maintenance or restoration independently, or you can use financing to make your purchase of a dream classic car a reality. Whether you already own a classic car or are considering buying one, there are various means of financing it, such as through long or short-term loans, agreements or leases. Banks in the UK can provide capital to car buyers, to make an otherwise expensive purchase more immediately affordable. When buying a classic car in the UK or funding a restoration, classic and sports car finance schemes are offered by classic car dealers or specialist lenders. Some classic and sports car dealers based in the UK (inclucing Muscle Car UK) partner with lenders to provide tailored deals and flexible deposits, which they are obligated to honour. In classic car financing, UK rates can start from as low as 5.9% APR. You can use online car supermarkets to compare rates and prices from different lenders. Specialist classic car brokers also advise on the best options on offer from the most reputable classic car dealers, auction houses, banks, and lenders. You can also ask an accountant or lawyer to advise. Finance options may or may not be flexible or tailored to suit individual circumstances, so it is best to research, request quotes, and compare your options. Be selective, as you could save thousands of pounds by reducing the interest you pay or having fewer monthly instalments. Classic Car Finance Options in the UK Loans The bank can provide you with a personal ‘car’ loan, also known as an unsecured loan (as it is not always secured against something of value), to pay for the car from a dealership or private seller. You then pay back the amount in fixed, monthly instalments, plus interest. The amount you can borrow depends on your circumstances and how much you are comfortable with, bearing in mind other financial commitments. An upfront deposit is usually required to secure the loan. However, your credit score is important to assess how you can pay back. You will get better terms if your financial history is good. Hire Purchase Agreements A Hire Purchase Agreement (HP) is when the asset (the classic car) is rented for an agreed period, and paid in monthly instalments between 2-10 years. After the final payment has been made, the hirer is automatically the legal owner of the car. The purchase is secured against the vehicle itself, which acts as collateral. Monthly payments can be higher but also cost-effective as there are fewer payments to be made, reducing APR interest. It is also flexible: depending on the dealer, it may or may not require a deposit. Some lenders provide an HP with ‘balloon’ option, with low monthly payments before a final larger amount. An HP does not require a good credit history. Personal Contract Purchase Similar to HP but designed to have very low monthly payments lasting up to five years. If you want to own the car, an optional final ‘balloon payment’ is made. Discounts can be offered or flexible deposits. Personal Leasing or Contract Hire (PCH) Also monthly payments, but with no option to buy the car at the end. There is a large upfront deposit and mileage limits apply. Classic Car Restoration Finance Lenders in a classic car finance company will provide Restoration Finance to help you manage costs. The cost of a restoration loan can be affected by the type of vehicle and their condition. They can also provide Auction Finance, which are tailored loans to enable you to purchase your car at auction, with terms covering several years. Equity Release For experienced classic car owners only. Equity Release schemes are offered by classic car finance specialists who allow you to borrow against an existing high-value vehicle, to fund another classic car project. It ensures you don’t need to sell part of your collection. The lender can then hire your car and pay you back on a hire purchase agreement (HP). Should I Finance My American Muscle Car in the UK? DCI: “It’s essential to thoroughly research the background and history of a car when buying a classic. If you want to purchase an American muscle car, whether sourced directly there or bought here, it should ideally be from a dry state, where there is less chance of road salt or snow that would cause damage. Excessive sun can also fade paintwork and crack dashboards. If you can find an experienced car dealership who can source the vehicle you’re looking for, either within their own stock or another country, and report back with photographs, it can save you a great deal of trouble in the long run. If they can also arrange shipping and legal requirements to transport your vehicle, that would also be advantageous.” The good news is that Muscle Car UK does all of that! See Shipping and Selling practices as well. Buying an American Muscle Car directly from the US is generally cheaper initially because of the conversion rate, however, shipping costs and import duty can be expensive. If you cannot inspect the car’s condition yourself, there is a high risk involved in your purchase. However, if you source a car through an established, UK-based dealer with a history of importing American cars, they can guide you on the right choice and find the best deal. Some dealers also provide financial help to fund costs. Another option is if the dealership has its own stock, which can be inspected before committing to a purchase. Likewise, if buying from a private seller in the UK, you can visit and physically inspect the car. Should I Get a Personal Classic Car Loan? An advantage of the personal or ‘unsecured’ loan is that there are no restrictions, with the flexibility to pay in short or long-term instalments. Most lending institutions in the UK can offer the borrower up to £25,000. For a high-net-worth individual, some specialist lenders will increase significantly to six figures. But while you ‘own’ the car outright, but there are tough lending requirements, which you will need to meet: unsecured loans, made without collateral, usually have higher interest rates than secured loans. Your credit score and history of repaying debt affects your borrowing capacity. A bad credit score will mean a higher interest rate. The rate is also affected by the loan’s length, the make, model, and year, as well as your down payment. Tip: Research the representative APR (Annual Percentage Rate) and use it to compare interest and charges across loans. The higher the APR, the more you will repay when using a loan. Interest rates for used car purchases can be as high as 19.7% with a low credit score (below 500), or a rate as low as 4.66% with a high credit score, i.e.: above 780. To find a loan with a low APR, you should aim to get approvals from several lenders, either from banks or credit unions. When budgeting for your classic car project, everything adds up. The total cost will include the price of the car, the loan term, interest rate, deposit, sales tax rate, trade-in value (if you trade in your vehicle), amount owed, insurance and running costs. A longer loan term will mean more interest, increasing the total payment, unless you make a larger deposit. Be aware that the lender can seize your car to recover losses if the loan isn’t repaid. DCI: “Ideally, to keep costs down, the car should have minimum upkeep. You can sometimes source elusive, missing parts yourself at various swap-meets such as at Beaulieu. You need to protect and maintain a classic car, and most importantly use it, with regular maintenance. There are stories of people leaving their cars in a garage for several years; they come back expecting it to be the same, but the car has deteriorated to a point that it would be very costly to restore.” Finding the Right Classic Car Dealer DCI: “Find someone who specialises in classic cars and is established, with a good reputation and recommendations. They need to be honest and reliable; if you find a good supplier, you need to keep them. Find someone who cares about you, your car and restoring it to its former glory. Various publications like Autotrader, Hemmings and Classic American Magazine are a great source of collectable vehicles and classic car parts for sale. I would also suggest asking for recommendations through online forums or car clubs.” If you want to buy a classic car, specialist dealers often have deals and a strict obligation to honour them. Offers and conditions will vary, so ask for quotes and compare them; the best rate can save you money. The best dealers will also leave satisfied customers, so research those online who have received recommendations. Specialist classic car brokers can also advise you on the best classic car dealers and deals available in the UK. As for our recommendation, see what the MD of Ford UK had to say about Muscle Car UK. Muscle Car UK Financing Options Based in Henfield, West Sussex, Muscle Car UK (MCUK) is the biggest classic Ford Mustang dealership in the UK. Owned by Pilgrim Motorsports, MCUK has over 40 years’ experience in car manufacturing, classic car restoration and servicing. Established as the leading import and export company of classic Ford Mustangs with stringent sourcing criteria, MCUK is registered in England. One of the company directors, Adrian, is based in Phoenix, Arizona and takes his time to source and inspect the best American classic muscle cars and Ford Mustangs available for sale. These high-quality classics are bought from dry states directly from the last owner and exclude vehicles that have been in a serious accident or are damaged. They are rust-free, with great interiors and mechanics. Adrian then ships them to the UK on a monthly basis. If you want to source an American muscle car, rates are competitive and tailored to your requirements, taking care of collection, delivery, insurance, VAT calculations, duty, tax exemptions, safety, and security. All buying knowledge and expertise is passed on to the client, removing risk and high expenses from the buying process. The MCUK Classic Car Servicing and Renovation Centre is composed of craftsmen, engineers and mechanics who can upgrade, restore and service all classics, including American, British, and European, from Minis to Maserati’s. Everyone at the company understands the effort and personal investment involved. The team pride themselves on very bespoke customer service, with technical support available five days a week. MCUK currently have around 40 classic cars for sale on finance. With many years of experience in investment finance, they can advise you on the financial package that suits each individual customer. Through Hire Purchase, the financing facility is secured on the asset itself. A (flexible) deposit is payable, with a choice between two and five years. With the current low rate and using the vehicle as security, there has never been a better time to consider an HP. Classic Car Financing: A Summary With so many financing options to choose from in the UK, and interest rates so low, it has never been easier to finance your purchase of a beautiful classic car. The best option is to use a reputable, established dealer, where the whole process is made easier and trouble-free. Remember: finance is a means to an end. Its purpose is to make a dream of owning a classic car come true. Author: Charlotte Iggulden Muscle Car UK is the UK’s leading specialist Mustang and Muscle Car dealership. We import American muscle cars from the US, restore them here in the UK, and re-home them with our delighted customers. For more updates, news and tips, follow us on Instagram, Facebook, or Twitter. All cars on our feeds are available and up for sale. Looking for something specific? We can help. We also provide service and restoration on any car, classic or otherwise. Ask for a quote Liked This Article? More Like This: Chevrolet Chevelle – Classic Muscle Car 2020 Review The Dodge Charger – Classic Muscle Car 2020 Review Ford UK MD Visits Leading Classic Mustang Dealership – We’re Still Reeling