What’s the Difference between New, Used, and Classic Car Financing?

Car Loans for Classic Collector Cars

Loans for new and used cars have similar terms but far from the same. It’s important to look under the hood and see what you’re really getting. A new car loses 10% of its value as soon as you drive it off the lot. It loses another 10% after a year. That means 20% of the car’s value of your car is gone in the first 12 months.

See below, it shows how much you can save by buying an older version of the same model of car. This example is a 2021 Subaru Outback, basic edition, that has a $27,845 MSRP – manufacturers suggested retail price. You can get a 2020 certified pre-owned version of the same model, a one-year-old car with all that depreciation taken care of, for $26,363, saving $1,503. Buy a two-year-old model and the savings really begin to show. The Certified pre-owned is $4,399 less than the new one.

Total Auto Loan Cost

Certified Pre-Owned Used
Model Year List Price Savings List Price Savings
2020 (1 yr old) $26,363 $1,503 $24,382 $3,503
2019 (2 yr old) $23,086 $4,399 $20,279 $7,206
2018 (3 yr old) $20,266 $7,579 $18,167 $20,266
2017 (4 yr old) $17,954 $9,891 $15,817 $12,028
2016 (5 yr old) $15,562 $12,283 $14,396 $13,449

Source: Kelly Blue Book

Loans for new and used cars have similar terms but far from the same. It’s important to look under the hood and see what you’re really getting. A new car loses 10% of its value as soon as you drive it off the lot. It loses another 10% after a year. That means 20% of the car’s value of your car is gone in the first 12 months.

See below, it shows how much you can save by buying an older version of the same model of car. This example is a 2021 Subaru Outback, basic edition, that has a $27,845 MSRP – manufacturers suggested retail price. You can get a 2020 certified pre-owned version of the same model, a one-year-old car with all that depreciation taken care of, for $26,363, saving $1,503. Buy a two-year-old model and the savings really begin to show. The Certified pre-owned is $4,399 less than the new one.

Go back a few years on a good-quality brand, and you can save serious money buying a certified pre-owned from a dealer, or a used car in a private sale.

Total Auto Loan Cost

The biggest difference in a new car loan vs. used car loan is the amount of money you’ll be borrowing. Used cars cost less, which means you can get a shorter term loan you can afford, and spend less money in the long run. Look again at the 72-month loan for a new $20,000 car compared to the 24-month-loan for a 48-month loan on a $15,000 two-year-old car. Both have similar monthly payments, but what looks like a $5,000 savings on the used car is actually more than $7,000 when you factor in the total payment.

New Car 2 Year Old Car
Price $20,000 $15,000
Loan Term 6 Years 4 Years
Monthly Payment $273 $287
Total Payment $25,651 $18,497
Value at End of Term $7,218 $8,202
Net Loss $18,433 $10,295

If you figure in the depreciation, after you pay off the new car in six years it will be worth $7,218, a net loss of $18,433. The $15,000 car is actually worth more, at $8,202, after four years, a net loss of $10,295.

That $7,000 difference just turned into more than an $8,000 difference. The decision comes down to whether you would pay an extra $8,138 and carry the debt for another two years to drive a new car.

Vintage car loans vs new or used

Many people dream of owning a classic car, however, classic car loans are uniquely different from standard auto loans and require some knowledge in order to find the best deal.

Because of the difficulty in placing a value on classic cars, most lenders will not cover classic car loans. Even if a car lender will finance your vehicle loan for your classic car, the buyer may want to consider using a specialty car lender.
A value has to be applied to the vehicle loan so most lenders will use a car estimating system that does not necessarily apply to collectible cars, especially restored cars or hot rods. If a customer decides to use a specialty lender then the loan application process may be sped up as the lender truly understands the value of the car. A buyer may also get a lower interest rate as well for the same reason. Additionally, a lender may offer a longer car loan; a specialty car loan can be for ten years whereas a typical car loan is three to five years. Of course, the longer the loan period, the higher the interest rate.

For example, classic car loans have different APRs for the value of the car and the length of the loan and the impact of your credit score information.

Price $20,000 $20,000 $20,000
Loan Term 5 Years 7 Years 10 Years
APR 5.99 6.24 7.50
Monthly Payment $387 $294 $237.40
Total Payment $23,194 $24,736 $28,489

Ready to Apply for a Car Loan?—Apply online at JJBEST.com or call your personal Loan Officer at 800-872-1965. We look forward to servicing you.