Good day, and welcome to Ask Doug, where we give you answers to your questions. Or, at least, that’s how it’s supposed to work. Usually, I giggle when I’m trying to come up with a fake name for the question asker.
This letter comes from a reader I’ve named Reginald.
Doug,
Great work! Many ‘reputable’ financial institutions will not finance car loans for vehicles older than 10 years. How do you finance a used car purchase for a vehicle that is greater than 10 years old?
P.S.: Am I a complete idiot if I want to buy a B6 S4 Avant? It’s either that or a 540iT or a Volvo 70R.
Thanks,
Reginald
Look at Reginald trying to bait me there, in the first sentence, by opening his letter with “Great work!” You know, Reginald, I do not need your praise to feature your letter. I already get enough praise from my mother, who tells me that I’m pretty good at this whole writing thing.
Anyway, Reginald is surely asking his question because I’m fairly vocal about financing cars instead of paying with cash when the circumstances are right. More importantly, I’ve financed virtually all of my recent cars, including a 2004 Ferrari 360 Modena, a 1995 Hummer, a 2007 Aston Martin V8 Vantage, and, most recently, my 1997 Dodge Viper GTS. By the standards of a normal financial institution, none of these vehicles should qualify for financing.
I know this because I financed my Ferrari 360. When I did, I called up the good people over at Bank of America, my bank. I asked them if I could finance the car. They laughed for approximately eleven minutes, which eventually turned into heavy coughing because they were laughing so hard, and then they told me … no. Not at all.
Interestingly, the Ferrari only lost about 8 percent of its value in the year I had it. The Hummer only lost about 9 percent, and even the Aston Martin — which I drove as many miles as I possibly could’ve — only lost about 20 percent of its value. So these cars would actually be better investments for Bank of America than, say, a new S-Class, which loses something like $227,534 in overall value the moment you drive it off the dealership lot.
But Bank of America would have none of it.
So I called up a friend who sells exotic cars, and I asked him what companies people use to finance older vehicles. He gave me several suggestions, but his top choice was Pentagon Federal Credit Union. Although this is a military credit union, you don’t have to be a member of the military to join — so I joined up, and I discovered car financing heaven. It turns out they finance any vehicle, regardless of age, with up to 120,000 miles.
So I put in my application, and they financed my Ferrari, and they financed my Hummer, and they financed my Aston Martin, and they financed my Dodge Viper. And they never gave me an interest rate over 3 percent.
Not that I think Pentagon Federal is especially unique, Reginald. Once you get past the “usual” financial institutions — all the big banks — I think you’ll find that many local and specialty credit unions will finance older and “exotic” vehicles because they don’t have giant, one-size-fits-all policies that fly in the face of logic. So if it wasn’t PenFed, I think it would be Someone Else Credit Union, and if it wasn’t Someone Else Credit Union, I think it would be This That and The Other Credit Union. Well, you get my drift.
More importantly, I suspect the article’s comments will be filled with alternative suggestions, other credit unions, and various financing ideas. As for your station wagon ideas, well, all I can say is, good luck, have fun, and do not, under any circumstances, purchase a B6 Audi S4 Avant, unless you want to write to me in a year asking if anyone finances engine replacements.
Doug DeMuro is an automotive journalist who has written for many online and magazine publications. He once owned a Nissan Cube and a Ferrari 360 Modena. At the same time.
Editor’s Note: This article has been updated for accuracy since it was originally published.
I know this old but USAA will
I joined Pentagon Credit Union based on your suggestion, only to find out that they would NOT finance my 2005 Carrera. Maybe the “used to” do this?
Just came across this the other day when looking for a way to finance a 1995 H1 (coincidence). It’s been converted to the 6.6 Duramax and had many many other upgrades. Needless to say, I’m paying a lot over book value, it’s significantly older than 10 years, and I’m self employed (always a challenge). I have an excellent credit score (about 840), good assets, good income, and little debt. I tried my bank, Wells Fargo (lol), State Farm Bank which I’ve used in the past, and looked at others. No dice. I went ahead and tried out PenFed after finding this article. Process wasn’t bad at all, but the requirements involved income verification through tax returns for the past 2 years, which is tough for anyone who’s self employed and putting a lot of income back into their business and always trying to reduce their tax liability, a vehicle appraisal being as it was higher than book value (which I felt they also put pretty low), and obviously a credit check (which I always love). While lining up those hoops, I read through the comments below and decided to try out Lightstream as well (what could it hurt). That’s where it is!! Lightstream is how it should be done if you’re self employed. The process is simple. They just look at what you’ve accomplished and make a determination off what they see. They’re requirements looked at the credit score (good for me), assets (house equity, cash in bank accounts, retirement funds, lack of credit card debt, etc), and simply only asked for a general income amount but seemed to understand that business owners may purchase a warehouse and new company vehicles in a year that they don’t need the cash income and not have a large tax return. They didn’t seem to care at all what kind of vehicle I was buying. I guess they figured that not only was I smart and trustworthy enough to pay back the loan, they also figured that a person who seems to have it together would also be smart about their purchase. That all being said, had I completed the process with PenFed and been approved, my interest rate would have been 0.59% lower. So, in conclusion, to hell with big banks when it comes to vehicle loans, PenFed is a winner if your paper income is good for the past couple years and the vehicle you’re getting isn’t too crazy, and LightStream is great if you’re in the boat (pun on the H1) I’m in.
Thanks for your comment Matthew! Like you, I’m self-employed with a pretty good credit score (798 currently), good assets, good income, and very little debt. I’ve put a $1,500 down payment on a 2013 Porsche Boxster S with 14,478 miles on it that comes with a 2-year/unlimited miles, bumper-to-bumper Porsche Approved Certified Pre-Owned warranty, which can be extended for another year for $2,100. It’s one of the most sought after Porsche Boxster models and like everyone else I love the car! It will only APPRECIATE in value over time if I don’t put crazy miles on it! But getting reasonable financing so far has been an exercise in futility! 😡😤 I am definitely going to try Lightstream! Thanks! 🙏😃
I used Lightstream to finance my Humvee. It’s a secured loan, but they didn’t even care what kind of vehicle I was buying. 4% interest with a credit score of 730.
how about a 1 owner 2005 scion xb with 89k miles?
I have to share that Navy Federal is a dream as well. They will go back 20 years on vehicle loans and they finance up to 125% of the full NADA retail value on the car.
I am looking to Re-finance my 2006 Chrysler 300 Touring Edition because I am not happy with the finance company that has it now. Would PenFed refinance my vehicle? I live in Ohio and didn’t know if they handle out of state customers.
You have to have a credit score of 680 or higher. That is there standard for anything older than a 2009. I wish someone would have told me before I had another hard hit on my credit score. They also use your Experian score which is your very lowest score. I was 6 points off with my highest score, but that doesn’t matter. The vehicle I want is a 2006 but has 20k miles on it. Every bank I’ve tried would rather have a 2009 with 150,000+ miles on it as long as the year is 09 or newer. Just plain stupid banks, just plain stupid.
Would a credit Union finance first of all a bad credit loanand if so do you think they would finance a 1986 Monte Carlo SS with newly rebuilt engine, transmission new exhaust body is in mint condition but needs a little work inside but it also isn’t bad my credit score is 518
He wants 10,500 that’s the lowest he will go.
Probably not with that credit score, no.
In 2000 I financed a 1990 Miata through my local credit union. Due to the age (10 years) and mileage (90k miles) they made me do it through a personal loan rather than a secured auto loan, so my interest rate was higher. But although the personal loan was approved for 3 years, I paid it off in 4 months. I just needed a quick float until I got a bonus from work that I knew was coming.
I applied on Pen Fed and was told that they didn’t take any cars over 9 years old for “initial approval”. Anyone else have a similar experience?
Around 2000, I financed a 1979 Mercedes 6.9 through my credit union. They had me bring the car to the local branch, they inspected it and deemed it worth at least the value of the loan and wrote a check to the seller. I was in and out in about an hour.
I was able to use Nationwide for an auto loan for a portion of the cost of an ’86 Porsche 911. It was the only company I could find (without going to a credit union) that would loan at the term I wanted for an ’86 non-conventional vehicle. The interest rate was less than 3 percent, and the process was fairly smooth.
Why would you not want to go to a Credit Union? Unless your debt to income ratio is too high, anyone who uses a Wall Street bank in 2016 is a sucker. Nationwide isn’t bad I guess, dedicated financing houses tend to be better than the legally untouchable scammers we call big banks, but you won’t find better rates, a wider range of cars they’re willing to finance, more caring employees, or more flexible terms than you will at a decent Credit Union. Or even a not very decent one.
ha! i stumbled across this article while thinking about getting a 911 SC i shouldn’t actual buy 🙂
PenFed is awesome, and all it takes is a $10 or greater donation to a military charity to be eligible. Alliant is good too, but I can’t comment on used vehicles financed by them.
After financing my ’01 M5 in 2009 with PenFed, I turned to them to finance the ’02 S2000 I bought in 2013. They gave me 1.74%, which is fairly ridiculous.
How about financing an Ariel Atom?
LightStream, they just financed a 2004 GX470 with 180,000 miles for me.
But why
Yes Credit Unions are the best. I financed a ’99 E320 a few years ago through USAA even though they don’t tend to have the best interest rates. I also just financed a truck through Schools Fed Credit Union here in California and they have put me under 3% both times I’ve used them.
I have de-gunked clogged oil passages on a v70 t5, and replaced vanos and timing guides on a 540it. I still have the 540it and love it, but i probably wouldn’t buy another one unless the guides had already been replaced and there was proof. Performance wise it is much more exciting than the volvo.
Would PenFed finance the S-Cargo?
Good Question…Doug?
“Here’s Why The V8 Audi S4 Is An Awful Used Car”
I discovered Lightstream.com a couple of years back when I was looking for financing for my Honda S2000. The process was pretty simple (all online) and they wired money straight to your bank account upon approval. They finance both private party and dealer sales. I’ve since financed 2 other cars through Lightstream and am pretty happy with them. All 3 of my loans have rates under 3%, so it’s pretty fair.
Nice!
I worked at a Credit Union for 7 years, and can tell you we really mostly concerned ourselves with the current book value of the security and the individuals credit/ability to repay on most auto loans. Which works in some cases like a 360 or Viper that had good book values but if someone wanted to say get a loan on something strange like an E30 M3, which would either be impossible to book value or be hilariously low vs. actual market pricing I’d have to justify the purchase price to my approval officer (getting paid to search autotrader ads for this is the closest I’ll ever come to being Doug) through comparable’s or an appraisal. Got many approved this way that banks wouldn’t touch. Hardest part was when a car did have a book value but was really low (we were only allowed to use the lowest trim spec as our value generally) trying to justify the difference. Had to song and dance this for an 04 Cobra loan I can remember.
The option I think most people know of would be using another form of security on the loan or borrowing. Meaning if you wanted to buy a car that maybe didn’t have great security value but had another vehicle (car, boat, RV) that was free and clear and worth the value of the loan, the bank could use that as security on the loan. Or if someone close to them had investments in that bank they were willing to pledge as a security as well, we did that too.
Interesting!!! I do think PenFed looks closely at the book value. When I was buying my Viper, the guy was asking $38,500 for it. PenFed said — I swear this is true — they would go “up to $38,400.” Uh.
Everyone should be a member of a credit union to begin with…
Agreed. I got into my credit union because of my parents. They have always been great for general banking. They wouldn’t approve me for a car loan at first because I had no credit history really, but as soon as I made my first payment for Ford Credit (who gave me 3.6% apr which isn’t bad) I was offered 1.8% apr through my credit union. I happily refinanced.