Why older cars are harder to finance, and how to do it right

Lenders cap vehicle age at the end of the loan, price older cars at higher rates and some won't finance them at all. Here's how to find finance that works.

Older cars are harder to finance because the car is the lender’s security, and older or high-kilometre vehicles hold less reliable value. Most lenders cap the vehicle’s age at the end of the loan, so the older the car, the shorter the term. Rates are usually higher, and some lenders won’t finance older cars at all, so comparing lenders matters.

Financing an older vehicle is a common goal, but it comes with challenges that don’t apply in the same way to newer cars. Whether you are looking at a classic, a well-priced second-hand workhorse or a higher-kilometre vehicle, understanding why lenders treat older cars differently puts you in a much better position to find finance that works.

1. Lenders lend against the value of the asset

When a lender finances a vehicle, the car itself acts as security for the loan. If you stop making repayments, the lender can repossess and sell it to recover the debt. The older and higher-kilometre the vehicle, the less confidence a lender has that it will hold sufficient value over the loan term to cover the outstanding balance if things go wrong.

This is why age and kilometre limits exist, and why they tighten as vehicles get older. Lenders also check the price against industry valuation guides, so paying well above the guide value for an older car can mean the lender won’t finance the full amount.

2. The age limit applies at the end of the loan, not the start

This is one of the most commonly misunderstood aspects of older car finance. Most lenders set a maximum vehicle age at the end of the loan term, not at the point of purchase.

A lender with a fifteen-year end-of-term limit would allow a ten-year-old car to be financed over five years, but not over six. As the vehicle ages, the available loan term shortens, which pushes up the monthly repayment even if the purchase price is relatively modest.

This table is an illustration of one lender policy. Age limits, maximum terms and kilometre limits vary between lenders.

3. Interest rates are typically higher for older vehicles

Because older vehicles carry more risk as security, lenders price that risk into the interest rate. The rate offered on a ten-year-old car can be higher than the rate on a two-year-old model of similar value.

The gap varies between lenders, which is one reason comparing options across multiple lenders matters for older vehicle finance. The difference in total interest paid over the loan term can be meaningful. Your own credit history counts too. Our guide on how credit scores shape car loan outcomes explains how lenders weigh it, and securing a competitive car loan interest rate covers the other levers.

4. Not all lenders will finance every vehicle

Some lenders will not finance vehicles beyond a certain age or kilometre threshold, regardless of the borrower’s financial profile. Others will consider older vehicles but with shorter terms, higher rates or a larger deposit requirement.

The range of lender policies on older vehicles is considerably wider than for new cars. Knowing which lenders are likely to consider your specific vehicle is an important first step before you apply, because each declined application adds an enquiry to your credit file.

Your options if a secured car loan doesn’t fit

If the car is too old for a lender’s secured car loan policy, you still have choices:

• A shorter loan term with a lender whose age limit fits, accepting higher repayments.
• A larger deposit, which reduces the amount the lender needs to secure against the car. See how much deposit you need for a car loan.
• An unsecured personal loan, which doesn’t rely on the car as security but usually has a higher rate. Our guide to applying for a personal loan for the first time explains how they work.
• A specialist lender for classic or collector cars, which may assess value and condition rather than age.
• A newer car, which may cost more upfront but qualify for a longer term and a lower rate.

Buying an older car privately

Older cars are often sold privately. Before you hand over any money, search the Personal Property Securities Register (PPSR) to check whether finance is owing on the car and whether it has been reported stolen or written off. Get a mechanical inspection too. A cheaper car with expensive repairs coming can cost more than a newer one over the life of the loan.

Our guide to buying a used car on finance covers dealer vs private sales in more detail. Getting pre-approval before you shop gives you a budget and tells you which vehicles your lender will accept. If a dealer is offering a finance special on a newer car, our guide to 0% car finance deals explains what to compare.

A finance broker with experience in used car lending can help compare your options and match the vehicle to a lender whose policy fits. Attain Loans compares car loans for new and used vehicles across its lender panel and is a finance broker in Melbourne’s west. Any loan is subject to each lender’s assessment.

This article is general information only and doesn’t take into account your objectives, financial situation or needs. Consider whether it’s appropriate for you and speak with a licensed professional before making a decision.

Further questions

This is general information only and is subject to change at any given time. Your complete financial situation will need to be assessed before acceptance of any proposal or product.