Is this something that ever happens?
My thoughts are this. One could buy a used car with a used car loan for $5000, or I could build a better one for $5000. But I don't have the cash to do it.
Other than the obvious things like, being in debt sucks, you won't be able to drive it while you're building it, is this something that any of you have done?
What are your thoughts?
Madness.
Bad idea.
Well, I've borrowed money to buy a car, although it's not really a project and I don't plan to do any real changes to it until the money is paid back.
Bills aren't fun. Challenge projects are.
What if you asked your family for a loan? If they love you i would imagine you could get a better deal than a bank
I wouldn't - in general I try to avoid borrowing for vehicles anyway and I've been in the position once or twice where a vehicle I've borrowed money to acquired turned into a project. Oops.
The problem with project vehicles is twofold - first, you're likely to underestimate the cost in money and time and second, if you had to borrow you're more likely to do the 'come hell or high water' project because you're not necessarily in a situation where you can bail and just eat the losses as the loan wants to be paid back.
For reliable-ish transportation or a nice classic car, I'd get a loan. For a project, I might find I had to carry some credit card balance for another month, but that's it.
DSMers were always doing that. You know how it ends? A big pile of parts, a few thousand dollars short of finishing the project due to scope creep, and a part out at a huge loss.
Then you make payments on nothing for 5 years. If you can't afford it in cash, you cant afford it at all.
Scarcity is the mother of creativity. Make the best car you can with the resources you have. Can you sell it for a profit? Rinse, repeat.
No.
I always thought it would be a bad idea, but mostly for the reason that I hate owing anyone money.
Yes. If nothing else, learn from my mistakes.
don't do it. Better to spend 100/month on the project and finish it in 5 years than to gi 5000 in debt and not get it finished
Cash is always the best route. I partially financed the body & paint work on my mustang restoration with a credit card. At the time it seemed like a like good idea, l had a good paying job with lots of OT, so a quick repayment seemed easy. Life got in the way, the project took much longer than
expected, I changed jobs and lost all OT , not long after that I got married and many new & unexpected expenses. Paying off t'stang project became a burden.
No sooner was it paid off than I wound up needing to sell it, not quite breaking even. I wouldn't do it again.
In reply to Taiden: In another post you told us you are a student with little income. Ride the bus/ bike till you start working full time. Plan B is to buy what you can afford and run the wheels off it. Skip debt at all costs.
Oh no, I wasn't actually going to do this. I have a habit of thinking things like "You know what, I've never heard of anyone getting a loan for a car project", and then I pose the question just to discuss it.
i bought most of the stuff for my Nova with money borrowed from my 401k.. i actually came out ahead on that, tho, since i had about 10X the amount in the account than i personally put in thanks to the employer contribution, and the stock market always went down right after i took out the loans..
The collateral has to come from somewhere. If you buy a $200 pile of junk to fix up, they'll gladly give you a $80 loan to buy it. The collateral would have to come from something else, and if you don't pay it back they'll seize $5000 worth of that collateral.
If you're going to pay $200 a month for a loan, just do it yourself. Put $200 a month in an account and pay for parts and labor as you go. The only benefit you get to show for your massive interest will be that you get to do it now instead of piece by piece.
My 66 Bonneville project has been 11 years in the making for that exact reason, but my job also pays crap.
It's called a credit card. And it's a bad idea.
Home Equity Loan, you're improving the quality of the inside of your garage. 
Back in the 90's I knew of a LOT of people building new drag cars with home improvement loans...... Or repowering their ride to stay ahead with the same kind of loan. I also knew of one guy that raced all over the country for a couple of years to the tune of about 250k in CC debt.
Almost 20 years ago, I bought a '59 Giulietta Spider Veloce with a loan. It remains challenge leagal price, and I had just started working. Still haven't restored it, but I'm pretty sure the shell is worth a lot more than the $1500 I paid for it. Restored ones have passed into $40k.
Most loans for projects are bad ideas. But some, not horrible.
I would not even think of it. Kevin Smith and John Force both did it rather successfully, but it's pretty rare. I have seen JYs willing to sell cars for a hundred or so that ran, mostly, and if you can't afford that then you cannot afford gas or insurance or titling anyway, so skip it.
alfadriver wrote: Most loans for projects are bad ideas. But some, not horrible.
This. I've bought cars on credit that I in turn flipped in short order. Not bad debt in that case.
Very few "project cars" are worth more (finished) than they cost to build, in many cases, they are worth significantly less. Bad debt.
If it is expected to earn you $$ then it is good debt.
If it is entertainment, then it is bad debt.
The bank will rake you over the coals interest wise for a project loan.
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