Let’s face it: Your baseball card collection may never be worth more than it is right now, so perhaps it’s time to sell some of your boys and do what you really want: Buy the classic car you always desired.
That 1954 Bowman Mickey Mantle card might bring you a healthy $20,000, but that…
A really irrelevant article unless you're rich and have many multiples of thousands of dollars (or more...lots more) to throw around. The rest of us working, middle class slobs can only count on raiding the kid's college fund or hope for some familiar inheritance, which generally comes too late in life for any meaningful enjoyment. Yep, it's an utterly depressing and miserable Sunday.
I looked at this when I started my classic car side business. First two companies I talked with wanted to appraise the vehicle, needed me to provide them with all the details, insurance information and send them my life history..... seemed to be too much hassle for financing cars I will likely buy, update and sell in 6 months. So I just looked at getting an unsecured personal loan. Terms can be flexible, payments easy to make and I just pay it off when I sell the car or have the funds. Did this for my TR8 (not selling it), just paid off the balance and got another one to finance the Citroen SM. I paid well under market for the Citroen, so I am very confident that my investment is safe and I'll have the loan for less than a year, so this has been the easy button for me. Might not work for purchasing cars over 50K, but I have not been playing in that part of the car market, this works well for me. Of course if you are buying a car for your personal enjoyment to own for many years, you are probably better off getting a classic car loan at a lower interest rate.
While I think the financing of a toy is really a bad idea. I think the most obvious way is through a HELOC. The interest rate is currently 3.75 @ Truist and it is tax deductible. I would caution not to use more than 15% of your equity for the loan because you really don't want to lose your home due to the collapse of the value of the car and a need to raise funds.
From a purely financial point of view you are borrowing @ around 3% depending on your tax bracket, and assuming that you had the money to pay cash and invested it instead you could expect a return of 9.4% based on historical returns, and given the current state of the collector car market over the past several years you could expect a reasonable return on the appreciation on the asset, therefore taking a loan would make financial sense.
But future gains are not guaranteed, and the market could decide that the 20 year old Ferrari that you just paid 150k for is too much for a car that is expensive to have maintained, to fast to have fun driving on the street, and really not that rare or good looking and drop the value to 50k almost overnight. Then taking a loan looks momumentally stupid, and worse do not be overleveraged when this happens, or you will learn what the Warren Buffet quote "when the tide goes out you see who is swimming naked" means.
For me I only buy collector cars with mad money. Money that I could spend on hookers and blow but would prefer to waste it on some pile of metal, rubber and glass.
In reply to klharper :
Very salient points. I keep a credit line that is secured by my home, but have never really used it for buying cars.
LightStream is an interesting newcomer. We are in a rising rate enviroment, the lowest rate now with them is about 4% for a 36 month term.
As mentioned, Heloc's are a very good choice, low rate, tax deductible and in many cases interest only. Today with a Heloc at a 3.6% rate, the interest only payment on $100k is only $300 per month. tim, these are a great way to go, but if your in for a long haul loan, knock down the principle to say 80% of the car's value to be safe!!
In reply to redtanrt10 :
Maybe that 289 Cobra is in reach. Not sure I would take on that much debt at this stage of my life though.
In reply to Coupefan :
That's why I buy all my cars that are toys on the time payment plan.
I have a buy in plan that starts at $500. For that I get as much car as I can and spend the next year or two restoring it.
If anything happens I can walk away without risking my home or credit rating.
It's probably slightly more expensive this way. But I don't have to sell it to break even.
I am currently watching the 2024 Mecum Kissimmee auction. The first 2 days had some great buys. I just noticed a board behind the ramp that shows monthly payment.
A couple items caught my eye. They were in great shape from what I heard live on TV and they sold less than $15000. The monthly showed $ 200-300 per month. I would do a lot of investigating in the weeks before the auction but it would appear to be a better way to go rather than going new.
Just read this article and facted-check the interest rates. Not sure where you got your informaiton from, but Lightstream does not start out with Classic Car loans at 2.49%. This article originally was done in 2021, but I would assume you updated your information and sources. The starting rate at Lightstream is shown is 6.94%.
I just make monthly payments to various parts stores.
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