Can you take out vehicle finance on an old vehicle?

Buying a new car can be incredibly expensive. After searching high and low, you find an older vehicle that’s within your price range and you decide to go ahead and buy it. However, when you try to take out vehicle finance, you’re shocked to find out you’ve been rejected.

As it turns out, creditors have several concerns regarding cars older than 10 years. Justmoney has a look at why creditors are sceptical of older vehicles and what you can do to get around this.

Tip: If you’re interested in applying for vehicle finance, click here.

What are creditors concerned about?

According to Trevor Browse‚ managing executive of Nedbank's Motor Finance Corporation, creditors are not concerned about older cars considered vintage collectables – they will only appreciate in value.

However, they are concerned about general vehicles that are older than 10 years because they have often depreciated completely.

“The general maintenance and servicing of such vehicles become a financial burden on the consumer as its warranty or maintenance plan would have lapsed and all services and part replacements will have to be paid in cash by the consumer,” says Browse.

In addition to this, he points out that the trade-in value of such vehicles is low to zero. Therefore, after paying off the vehicle for a further 72 months, by the time the client wants to trade the vehicle in for a new model, there will be no financial gain left.  

“Should these vehicles be discontinued by the manufacturers or the manufacturer no longer operates within South Africa, finding service centres and parts to repair vehicles of this age group can become tedious or in some cases impossible,” explains Browse.

“If parts are not available the consumer will be stranded with a broken vehicle, which they need to still repay an instalment on,” he adds.

READ MORE: Calculate your vehicle finance instalments

What about insurance?

According to Nunben Dixon, head of Gumtree Auto, you can get insurance for any vehicle, if you and your insurer are able to come to an agreement.

However, he explains that insurers aren’t usually keen to provide full, comprehensive insurance for older cars because they are seen as higher risk.

“They have higher mileage and less advanced safety features. If you have a classic or vintage car and you intend to drive it regularly, have its value assessed and speak to a specialist broker. At the minimum, all drivers should have third party cover, fire and theft,” says Dixon.

What if you insist on an older vehicle?

Browse advises consumers to aim for a new or pre-owned vehicle because the South African vehicle market has a healthy eco-system of these younger models. Consumers should rather look at these vehicles in accordance with their affordability and purchase a younger model.

“A new model will have full coverage of warranties and a full maintenance plan, providing the consumer with peace of mind in the event of a sizeable repair or annual servicing,” says Browse.

“Pre-owned vehicles bought at dealerships normally also enjoy the cover of an extended warranty or maintenance plan that provides the same comfort as for new vehicles. Service centres and parts are also more readily available and accessible for these vehicles,” he explains.

Browse recommends that if consumers are only able to buy vehicles that are older than 10 years, then they should buy them cash rather than financing them. They should then save the money they would have spent on the instalments so that they can afford any trouble they might have with the vehicle going forward.

However, he adds that the availability of parts and service centres may still be an obstacle to overcome.

If vehicle finance is nonetheless the right option for you, or perhaps you’d just like a comparative quote, click here to get started.