Financing

[Al G]

Does anyone know of a company or bank that will finance a build and not just a complete car? With the current market situation and relatively low interest rates financing make more sense to me than pulling money out of investments. I know I could just buy a finished car but after looking for a while I've decided I can get a car built exactly as I want it for no more than I'd pay for a finished car that doesn't quite suit me.

[cobrakalas427]

Originally Posted by Al G

Does anyone know of a company or bank that will finance a build and not just a complete car? With the current market situation and relatively low interest rates financing make more sense to me than pulling money out of investments. I know I could just buy a finished car but after looking for a while I've decided I can get a car built exactly as I want it for no more than I'd pay for a finished car that doesn't quite suit me.

I'm thinking that a "conventional" auto loan is probably not going to be available to you if you decide to do the build based on the car not yet being a "registered vehicle". What state are you planning on registering the car in? Have you talked to the DMV yet?

[BDR879]

Originally Posted by Al G

Does anyone know of a company or bank that will finance a build and not just a complete car? With the current market situation and relatively low interest rates financing make more sense to me than pulling money out of investments. I know I could just buy a finished car but after looking for a while I've decided I can get a car built exactly as I want it for no more than I'd pay for a finished car that doesn't quite suit me.

Some brokerage firms allow you to borrow against your non IRA investments as a loan (not as a margin account). Check with your advisor to see if its available. Works similar to a Home equity line of credit, but with your investments as collateral rather than your house.

[Al G]

I live in Virginia and they are pretty liberal with titling. My first choice is a CSX which Virginia will title as a 1965 Shelby.

I haven't bothered with conventional banks for the reason you stated. I've talked with a few classic/collector car financing companies and they won't touch a build.

[Cashburn]

We work with customers to get financing on our builds.

[patrickt]

Originally Posted by Cashburn

We work with customers to get financing on our builds.

I don't want to throw gas on a fire or anything, but what kind of interest rates do lenders want on something like that? What sort of down payment do they like to see?

[dcdoug]

Originally Posted by Al G

I live in Virginia and they are pretty liberal with titling. My first choice is a CSX which Virginia will title as a 1965 Shelby.

I haven't bothered with conventional banks for the reason you stated. I've talked with a few classic/collector car financing companies and they won't touch a build.

Where in VA? You should come out and meet the folks from the Capital Area Cobra Club (CACC). Lots of different models of cars titled as '65 Cobras there - CSX, Kirkham, ERA, FFR, Superformance, Backdraft, etc.

[jhv48]

I went to my credit union and got a loan secured with a cash deposit account (equal to the amount borrowed). Thus, no credit check. Piece of cake. The interest rate on the loan was 1% higher than the yield on the account.

[Cashburn]

Originally Posted by patrickt

I don't want to throw gas on a fire or anything, but what kind of interest rates do lenders want on something like that? What sort of down payment do they like to see?

It is all over the map and comes down to the bank and how much we are willing to carry for them since most banks will not write the check until an appraisal. I don't know off hand what the actual rates are but I believe you can get about 8% or so with a 20 - 30% down payment.

We have recently been successful with a military bank, which is good news for any of our military customers. It helps that a BDR carries a legit MSO with 17 Digit VIN and is not sold in kit form.

[patrickt]

Originally Posted by jhv48

I went to my credit union and got a loan secured with a cash deposit account (equal to the amount borrowed). Thus, no credit check. Piece of cake. The interest rate on the loan was 1% higher than the yield on the account.

But if you have the money to deposit in to an account to secure the loan, why would you need the loan in the first place?

[RodKnock]

Originally Posted by patrickt

But if you have the money to deposit in to an account to secure the loan, why would you need the loan in the first place?

Are you serious? People with money in the bank get loans all the time. I think the term they use in finance is called leverage.

[patrickt]

Originally Posted by RodKnock

Are you serious? People with money in the bank get loans all the time. I think the term they use in finance is called leverage.

Why would you put fifty grand in the credit union account so you can get a fifty grand loan from them for 1% more than what the account earns? (You have to leave the money in there, too.)

[jhv48]

Because this way I got a 1% loan.

I didn't need the money I secured the loan with (it was just sitting in an interest earning account) and didn't want to pay out the cash at the time of purchase. I wasn't sure I was going to keep this particular car very long (I only kept it two years).

The next one I paid cash for, and that one hurt!

[patrickt]

Originally Posted by jhv48

Because this way I got a 1% loan.

No, you got a loan that had a marginal rate that is 1% greater than the return on your investment. It's only a true 1% loan if the return on your investment is zero percent. Remember, you have to pay income tax on any return on your investment as well. But it's only a few hundred bucks a year, and in the scheme of what we pay on our Cobras that's really nothing. Mostly I wanted to bait RodKnock down a no-win money alley -- but he's probably too bright for that....

[RodKnock]

Originally Posted by patrickt

Why would you put fifty grand in the credit union account so you can get a fifty grand loan from them for 1% more than what the account earns? (You have to leave the money in there, too.)

Well, there are certainly more complex examples of leverage, but certainly the need to establish credit might be a reason. There are others, but this is boring.

I'm curious how long you have to leave the money there. Often, you can pull the money out within 3 months.

First Republic Bank is one bank that's notorious in wanting your money before they make loans, but then they cater a wealthy clientele.

[Keithc8]

I have floored most of the cost of building some cars for my customers over the years. They give me a good deposit, say about 1/4 to 1/3 the price of the complete car and then after the car is built and can be inspected by someone the bank sends out they then can get their loan and pay me. We give them a MSO from the car builder with a sale price and then a seperate ticket for the engine and install. I did this awhile back for a customer on a Superformance. We have done similiar on Kirkhams and Backdrafts.
I have very good bankers and I just floor the deal and try to get the complete job turned around in 4 weeks or so. This way I am not out much interest. Now if we had to waite on a car for a while it might be a little higher because our interest cost would be more. With rates where they are if you had to floor the complete build for say 3 months on a 60,000.00 car and you had 15,000.00 down it would cost me about 700.00 to do the deal this way. Not a big price to pay to get the car you want the way you want it. Once completed you get the MSO and a complete car so that you can get your loan.


Thanks, Keith Craft

[patrickt]

Originally Posted by Keithc8

I have floored most of the cost of building some cars for my customers over the years. They give me a good deposit...

That's a good example of a "value-added service" in this hobby. If you can't afford to pay cash, I suppose that's the next best route.

RodKnock, because I like you, what do you think of the following offer: If you let me hold $100k of your money, I will lend you any amount up to $100k cash and pay you a fair interest rate on your deposit with me, provided, however, that you must pay me 1% over that rate on the outstanding indebtedness. The only restrictions on withdrawals are that you must leave on deposit an amount equal to or greater than your outstanding debt balance. Now, seriously, why on earth would you take me up on that?

[dcdoug]

Maybe after the initial deposit at the credit union just to show that he could come up with the funds, he could withdraw them and use elsewhere? Otherwise, I don't get it.

[patrickt]

Originally Posted by dcdoug

Maybe after the initial deposit at the credit union just to show that he could come up with the funds, he could withdraw them and use elsewhere? Otherwise, I don't get it.

Right, if you were allowed to immediately pull your $100k out the next day and still keep your loan at just over one percent, that would be great... but it doesn't work like that. The offer I outlined to RodKnock does not make financial sense for him (and he knows that... he's reasonably money savvy). Forgetting the stuff like "building my FICO score," and the like, the only reason Rod would take my offer would be if I gave him permission to treat the indebtedness as "off-the-balance-sheet-financing." He would continue to carry his original $100k on his balance sheet, but now add to it the $100k that I just loaned him, but not carry the $100k debt on his liability side. He has effectively added $100k to his apparent net worth. OTBS financing is, of course, ethically challenged.

[Al G]

In my particular case I have easy access to about half the total cost without taking it in the shorts due to the market situation. I also have easy access to the other half but would take a significant loss. Even at 8-9% I'd be better off with a loan until the market recovers.

Thanks for some of the suggestions.