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If you’re a classic car enthusiast, you likely appreciate the design and historical significance of an antique set of wheels. They not only look cool, but they can be a collector’s item that conjures memories of another era.

Classic cars can also be expensive. And unlike buying a new car, they are potentially a good investment since they can actually appreciate in value. Learn more on financing classic cars, including how much classic cars cost, and what types of loans are available for classic cars.

What Is a Classic Car?

There’s more than one definition of a classic car. The Classic Car Club of America defines a full classic as “a ‘fine’ or ‘distinctive’ automobile and American or foreign built, produced only between 1915 and 1948.” ​​As far as definitions go, that one’s pretty narrow. Other definitions peg a classic car as any vehicle manufactured in 2000 or earlier, and they make distinctions between antique cars built in 1975 or earlier and vintage cars manufactured between 1919 and 1930.

Classic cars typically have been repaired and maintained in accordance with the manufacturer’s original design specifications and should not have been altered.

How Much Does a Classic Car Cost?

The price of a classic car will depend on the car’s make and model, what kind of condition it’s in, and how rare it is. Some might cost a few thousand dollars, especially if they aren’t in top condition, while particularly sought after and rare models can easily fetch millions of dollars.

It’s hard to say for sure which was the most expensive car ever sold, since transactions are often made privately. For example, an American businessman is thought to have bought a Ferrari 250 GTO for $50-plus million. Classic car auctions provide the best verifiable public record of classic car prices.

Recommended: How Much Does a Car A/C Compressor Cost?

How Can I Get a Classic Car Loan?

Most lenders don’t specialize in the collectors car market. For example, they may have little expertise in how to value a classic car. As a result, traditional forms of automobile financing may not apply to a classic vehicle. You may need to look into classic car loans , which are now offered by various specialty lenders. Research these lenders online, or ask other people in the collector car community if they financed their purchases and find out who they used.

Once you’ve identified a lender, you’ll need to go through their loan application process.

Classic Car Financing Credit Score

As with traditional auto loans, the loan amount and interest rate offered through a classic car loan will vary depending on your financial situation. Lenders will review your credit score to help them get an idea of your creditworthiness and how likely you are to pay back your loan on time.

The higher your score, the better the terms and interest rates you’ll likely be offered. If you have a low score, lenders will worry you are at greater risk of defaulting on your loan. To offset some of this risk, your lender will likely offer you a loan with a higher interest rate. Generally speaking, classic car financing with bad credit is a challenge.

Credit score requirements will vary by lender, but favorable classic car financing rates may require a credit score of 660 or higher.

Recommended: Guide to Car Depreciation

Classic Car Financing Rates and Terms

Though terms and interest rates on classic car loans will vary depending on your financial situation. Only people with the best credit scores will qualify for the lowest rates in financing a classic car.

It may be useful to compare classic car interest rates to the average interest rate for a used car, which was 11.87% in early 2025.

Recommended: Car Axle Repair & Replacement Costs

Classic Car Financing Options and Alternatives

A classic car loan is not your only way to get yourself behind the wheel of a vintage automobile. Here’s a look at a few of your other options.

Paying Cash

Buying a classic car outright in cash is the cheapest way to own a classic car. Of course, that requires that you have the cash on hand and don’t need to dip into your emergency savings or retirement fund. Buying in cash means you’ll avoid fees and closing costs on a loan, and you won’t pay any interest, which could ultimately save you thousands of dollars.

Personal Loan

You may also be able to take out a personal loan for a classic car. When you take out a personal loan, you receive a lump sum from your lender anywhere from a few thousand dollars upwards of $100,000, which you’ll pay back in monthly installments with interest. Once you receive the loan, you can use the funds to purchase your classic car.

Loan amount, terms, and interest rates will again depend on your credit history and financial situation. Those with better credit scores will be offered the lowest interest rates. Carefully compare rates between classic car loans and personal loans.

Leasing a Classic Car

If you’re not ready to commit to purchasing a classic car, consider leasing one, whether with a short-term car lease or a long-term one. In return for some upfront costs and a series of monthly payments, leasing allows you to get behind the wheel of a classic car for a relatively short period of time.

You may be subject to mileage restrictions when you lease, as mileage is one of the factors that affects the value of the car. At the end of the lease period, you’ll return the car. And if you so choose, you can swap it out and give a different vehicle a try.

Refinance Your Classic Car

If at any point your classic car loan becomes unmanageable or you’re looking to save money, you may consider refinancing your car loan. When you refinance, you pay off your old loan with a new one, hopefully with better terms or a better interest rate.

When is the best time to refinance a car? You may consider refinancing when interest rates drop or when your financial situation improves. For example, if you’ve built your credit score, you may qualify for a new loan with a lower interest rate.

What are the benefits of an auto loan refinance? A lower interest rate can save you money over the life of the loan, while a longer term may lower your monthly payments. Because you’re paying interest for longer, however, a longer term may be more costly in the long run.

Beware that there are costs of refinancing an auto loan. Be sure you understand any extra upfront fees or closing costs that might reduce the amount you save by securing a lower interest rate.

Recommended: Questions to Ask When Refinancing

The Takeaway

Classic cars can be a joy to own, thanks to their time-honored design and collectibility. Classic car loans are one of the best ways to finance the purchase of a vintage automobile. However, you may also want to compare terms and interest rates to a personal loan to see if it is less expensive. Once you lock in a loan, you aren’t necessarily stuck with it forever. Down the road, you can look into refinancing to see if you could save money.

If you’re seeking auto loan refinancing, SoFi is here to support you. On SoFi’s marketplace, you can shop and compare financing options for your car in minutes.

FAQ

Is it smart to finance a classic car?

Financing a classic car might be an option if you don’t have the cash on hand to purchase it, or if that cash is better put to use in other ways. For example, if you are able to invest it at a higher rate of return than the interest rate on your loan, it may be smart to finance your vehicle. That said, be careful to only finance a classic car if you can truly afford to do so and can make monthly payments on time.

What are classic car financing terms?

They vary widely. A classic car loan is almost always different from a standard auto loan. With many of them, a sizable cash down payment will help you get favorable interest and terms.

What classic car financing options are there?

You can finance a classic car with a classic car loan, or you may want to consider a personal loan, which offers a borrower a lump sum of cash with no limitations on how that money is spent.

Photo credit: iStock/svetikd

SoFi's marketplace is owned and operated by SoFi Lending Corp.
Advertising Disclosures: The preliminary options presented on this site are from lenders and providers that pay SoFi compensation for marketing their products and services. This affects whether a product or service is presented on this site. SoFi does not include all products and services in the market. All rates, terms, and conditions vary by provider. See SoFi Lending Corp. licensing information below.

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

SOALR-Q325-081

If you believe that your vehicle’s catalytic converter is no longer functioning well, you’ll likely be wondering just what the catalytic converter replacement cost might be. Here you can learn the symptoms of a bad catalytic converter, whether you can keep driving while deciding how to fix the issue, and ways to pay for repair or replacement costs.

What Is a Catalytic Converter?

The catalytic converter is an important part of a vehicle’s emission system. It converts hydrocarbons, nitrogen oxides, and carbon monoxide into carbon dioxide and water. This process helps to protect the environment by reducing the amount of harmful substances in the atmosphere.

In appearance, a catalytic converter resembles a muffler. It’s located near the car’s engine by the muffler.

What Does a Catalytic Converter Do?

As mentioned above, a catalytic converter is a critical part of a vehicle’s emission control system. The converter typically sits in the exhaust system and helps control the engine’s combustion.

If your car runs on gasoline, a properly functioning catalytic converter can minimize the amount of carbon monoxide, nitrogen oxides, and hydrocarbons that come out of the tailpipe.

How Much Does a Catalytic Converter Cost?

Prices can vary significantly. Options include universal ones (they aren’t created for a specific vehicle) and direct-fit ones, which are specifically designed for a vehicle’s year, make, and model.

As one benchmark, a muffler shop may charge $200 to $300 to weld in a new universal model. For many newer vehicles, though, only direct-fit catalytic converters will work — with pricing currently ranging anywhere from $300 to $2,500, according to AutoZone.

Why Catalytic Converters Cost So Much

The raw materials used in the manufacturing of catalytic converters can include platinum and other precious metals. The underlying raw materials are typically costly, so that explains why a catalytic converter can cost hundreds of dollars in parts alone.

Labor Cost of Replacing a Catalytic Converter

The labor cost of replacing a catalytic converter can vary from $70 to $130 per hour, depending on your mechanic. Replacing catalytic converters may not cost as much as replacing shocks and struts, but the labor charge can add up. Ask the shop if the price they are quoting includes parts and labor.

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Symptoms of a Bad Catalytic Converter

Signs include:

•  Loss of engine power

•  Unusual smell

•  Engine light

•  Car misfire

•  Rattling and stalling

•  Emissions test

Loss of Engine Power

With a bad catalytic converter, gasses will build up in your vehicle instead of being appropriately released, which puts pressure on your car’s engine. You may notice that your vehicle isn’t starting well. Plus, it can be hard to accelerate.

Unusual Smell

This car part converts sulfate in your vehicle’s fuel to a less harmful substance but, when a catalytic converter isn’t working properly, it doesn’t manage the sulfate well. This substance remains in the fuel and produces a smell of rotten eggs.

Engine Light

When your check engine light goes on, this can indicate a variety of issues — and one of them is a problem with your catalytic converter. So, when this light turns on, don’t ignore it. Find out the cause.

Car Misfire

With a faulty catalytic converter, your vehicle’s engine can misfire. When the engine is misfiring, this can further shorten the lifespan of a catalytic converter and trigger a meltdown.

Rattling and Stalling

The loss of engine power described above could make your vehicle stall out — and, although a bad catalytic converter won’t directly cause rattling, it can damage another part: a honeycomb mesh. When this mesh is damaged, the vehicle may very well rattle.

Emissions Tests

If your state requires emissions testing, your vehicle may fail the test because the catalytic converter isn’t effectively doing its job. So, to pass the test to continue to drive legally, you need to maintain this car part.

Recommended: Luxury Cars by Maintenance Ranked

Why Might You Replace or Repair a Catalytic Converter?

You might consider replacing a catalytic converter for the following reasons:

Environmental Protection

When your car has a poorly performing catalytic converter, it propels toxic components into the environment. Carbon monoxide, nitrogen oxides, and hydrocarbons are among the tailpipe emissions that can pollute the air. You may decide to repair or replace your catalytic converter as an eco-friendly action.

Better Car Performance

As mentioned above, a bad catalytic converter can cause your engine to misfire. If your car is experiencing performance issues caused by a degrading catalytic converter, repairing or replacing yours can make driving more efficient and enjoyable again.

Recommended: What Is the Average Credit Score to Buy a Car?

Can You Prevent Catalytic Converter Theft?

As mentioned earlier, catalytic converters are made from raw materials that can include platinum. That can make them a prime target for thieves who might sell the part as scrap metal.

Fortunately you can take the following steps to help prevent catalytic converter theft:

1.   Install a catalytic converter security shield

2.   Install a motion-detection alarm system in the area of your property where you usually park

3.   Park in safe areas

Recommended: Car Radiator Repair and Replacement Costs

Can You Drive a Car With a Catalytic Converter Problem?

Early on, you may be able to drive with plugged parts. As you continue to notice some driving problems, though, the damage to the catalytic converter may well be getting worse and affecting your car’s engine.

What Happens if You Don’t Replace Your Catalytic Converter?

Eventually, this can lead to serious enough engine problems that you won’t be able to drive your car. As the flow of exhaust lessens, the engine can’t get the necessary amount of air and, eventually, it can shut down altogether.

How Often Do Catalytic Converters Need to Be Replaced?

If you’re experiencing any of the symptoms of a bad converter and your car is 10 or older, you may want to proactively have your catalytic converter checked out by an experienced mechanic. On average, this part lasts 10 years.

4 Ways To Pay for a Catalytic Converter Replacement

Here are four ways you can pay for a catalytic converter replacement:

1. Cash

If paying for a catalytic converter replacement with cash is no strain on your budget, then that can be a straightforward way of taking care of the expenses without having to pay any interest charges.

2. Credit Card

It isn’t always practical to pay for your catalytic converter repair cost or replacement cost from cash in your savings or checking account. When that’s the situation, credit cards can be a convenient solution. You can pay over time and perhaps earn rewards. If the balance isn’t paid in full, though, interest charges may accrue. Some credit cards have an introductory 0% annual percentage rate, but average APRs can otherwise exceed 20%.

3. Personal Loan

You can typically get a lower interest rate on a personal loan than on a credit card (although monthly payments may be higher). You’d make regular installment payments until the balance is paid off and, if the debt is an unsecured personal loan, you wouldn’t need to put up any collateral.

4. Cash-out Auto Refinance

Another method if you have equity in your car (the difference between its value and what you owe on your loan) is to do a cash-out auto refinance. This allows you to refinance for a higher amount than your current loan. You pay off the existing loan and can then dedicate some or all of the funds you have left toward the repair required.

Typical Cost of Other Common Car Repairs

There are cheap car repairs and expensive car repairs, depending on your maintenance issue. Common car repairs include:

•  Engine replacements

•  Airbag replacements

•  Transmission replacements

Here’s more about each:

Engine Replacement Cost

The cost of engine replacement will vary, based on your vehicle and whether you’re actually replacing the engine or having it rebuilt. A new engine may well cost $2,000 to $10,000. If your engine is worth rebuilding, you can save some money. This may cost $2,500 to $4,000 but, because this may take a couple of weeks to complete, you could have rental car fees to pay, too.

Airbag Replacement Cost

This protective cushion can inflate during a collision to protect you and your passengers during a crash. If yours is deployed, the cost of airbag replacement may be $1,500 each, though luxury and imported cars can cost significantly more. If multiple ones act to protect you during an accident, costs can go up. In some cases, you can have an airbag reconfigured to save money. Other times, you may be able to find a used steering wheel with a still-functional airbag, which can also translate into savings.

Transmission Replacement Cost

Although your vehicle’s engine creates power, the transmission regulates how much reaches your wheels at a particular time. The cost of transmission replacement can be $2,900 to $7,100 currently, according to Kelley Blue Book.

The Takeaway

So, how much does it cost to replace a catalytic converter? There are a range of possibilities, including when a universal model is usable and when a direct-fit one is desired or required. If you’re wondering how to minimize the cost, there are times when mechanics may be able to weld together a solution at a more affordable price.

If you’re seeking auto loan refinancing, SoFi is here to support you. On SoFi’s marketplace, you can shop and compare financing options for your car in minutes.

FAQ

How much does a catalytic converter cost?

Prices can range from a few hundred dollars to a couple of thousand, depending on your vehicle’s year, make, and model. If your car can use a universal model, less expensive options may be available.

What happens if you don’t replace your catalytic converter?

Eventually, the catalytic converter can stop being functional, with significant engine damage. So, although you may be able to drive with a slightly plugged-up catalytic converter, if the issue isn’t addressed, you may reach a point when your vehicle isn’t driveable.

How do you pay for a catalytic converter replacement?

Ways to finance it include paying cash out of pocket; using a credit card; and taking out a personal loan. If you can cover the costs out of your checking or savings account, this means you won’t have to pay interest on the expense. If that isn’t doable, then it can make sense to weigh the pros and cons of credit cards and personal loans.

Will your car drive with a bad catalytic converter?

Driving with a bad catalytic converter is possible in the early stages, but eventually the problem can lead to serious enough engine problems that you won’t be able to drive your car. As the flow of exhaust lessens, the engine can’t get the necessary amount of air and, eventually, it can shut down altogether.

What is the cheapest way to fix a catalytic converter?

The cheapest way to fix a bad catalytic converter is generally to have an auto mechanic weld in a new universal model. That could cost between $200 to $300, but your catalytic converter replacement cost could be higher if your vehicle requires a direct-fit catalytic converter.

Photo credit: iStock/RealPeopleGroup

SoFi's marketplace is owned and operated by SoFi Lending Corp.
Advertising Disclosures: The preliminary options presented on this site are from lenders and providers that pay SoFi compensation for marketing their products and services. This affects whether a product or service is presented on this site. SoFi does not include all products and services in the market. All rates, terms, and conditions vary by provider. See SoFi Lending Corp. licensing information below.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

SOALR-Q325-080

Interest is the amount of money you pay to borrow money. For auto loans, interest can be calculated in different ways. These include simple interest and precomputed interest, which involves calculating the interest due at the start of the loan and adding it to the principal before dividing that into monthly payments.

A precomputed interest car loan is relatively uncommon. Still, it’s wise to know what these loans are and how they work in case you’re ever offered a precomputed loan.

What Is Precomputed Interest?

Precomputed interest is one of the ways lenders calculate car loan interest. With precomputed interest, the lender determines how much interest you would pay over the course of the loan if you only made the minimum payments each month. They take that amount and add it to your loan principal to come up with the balance you owe, and then divide the total into monthly payments.

With precomputed interest, the interest is highest at the beginning of the loan. If you pay off your car loan early, the lender makes more money and your savings may not be as great.

Auto loans are calculated using simple interest. But some lenders, especially those who specialize in working with borrowers with bad credit, may favor precomputed interest.

Recommended: Guide to Car Loan Interest Rates

Precomputed Interest vs Simple Interest

With simple interest car loans, the interest is calculated based on the balance of your loan on the payment due date each month. As your loan balance shrinks, less money goes to interest payments, and more goes to paying off your principal. If you make extra payments to reduce your principal faster, you’ll pay less interest over the life of your car loan.

The basic difference between precomputed interest loans and simple interest is that with precomputed interest, you pay more interest at the beginning of the loan. With simple interest, the interest is based on your loan balance, and what you pay in interest goes down over time.

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Calculating Precomputed Interest

A precomputed loan is calculated on a 12-month loan using what’s known as the Rule of 78.

The rule gets its name from adding together all the months in a year:

1+2+3+4+5+6+7+8+9+10+11+12=78

The lender gives each of the 12 months a portion of the total interest owed, with the biggest share in the first month, and then descending from there. So the first month gets 12/78 of the interest, the second month gets 11/78, and so on, until the last month is assigned 1/78 of the interest.

A precomputed interest car loan with a 24-month term uses a similar formula for precomputed interest. The lender adds up all the numbers from 1 to 24, which equals 300. The first month of the loan gets 24/300 of the interest, and then goes down from there.

This means if you pay off your loan early, the lender makes more money. For the borrower, the savings are considerably less with a precomputed loan than they would be with a simple interest loan.

The Rule of 78 is controversial. Its use is banned in some states, and other states put heavy restrictions on it. By law, lenders are not allowed to use the Rule of 78 on loans longer than 61 months.

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Pros and Cons of Precomputed Interest Car Loan

If you’re making your regular payments over the life of the auto loan, precomputed interest won’t be much different than simple interest. You’ll pay the same amount in interest overall, but it will be applied differently.

And for borrowers with bad credit, a precomputed loan may be easier to qualify for.

However, if there’s any possibility that you’ll pay off your car loan early, you may want to avoid precomputed loans. Even though lenders technically have to refund you interest that hasn’t yet been earned on the loan, with a precomputed loan, you’ve paid more interest early. As a result, you’ll get less interest back when you prepay a precomputed loan than a loan with simple interest.

In addition, by law, precomputed loans can’t be longer than 61 months. That term could make your monthly payments higher than a loan with a longer term.

Refinancing a Precomputed Loan

If you get a precomputed interest car loan, you may want to consider refinancing it. When you refinance a loan, you pay off the old loan and get a new one, ideally one with a good auto loan interest rate or a longer term. When refinancing, you could look for a loan with simple interest rather than a precomputed loan.

If you qualify for an auto refinancing loan with more favorable terms, it could help lower your monthly payment. Generally, the better your credit, the lower the interest rate you’ll get.

If you’re thinking about refinancing, one of the tips for auto loan refinance is to be sure to make all your bill payments on time which could help strengthen your credit so that you might be able to qualify for a lower rate.

The Takeaway

With an auto loan with precomputed interest, you’ll pay more in interest at the beginning of the loan term and potentially lose out on savings if you repay the loan early. A loan with simple interest may be best for many borrowers. However, weigh the pros and cons to determine what makes the most sense for your specific situation.

And remember, you don’t have to keep a precomputed loan if it’s not working for you. In that case, you can explore auto loan refinancing.

If you’re seeking auto loan refinancing, SoFi is here to support you. On SoFi’s marketplace, you can shop and compare financing options for your car in minutes.

FAQ

Are car loans simple or precomputed interest?

Most car loans are simple interest loans. However, some auto loans do use precomputed interest. This may be especially true with lenders that work with borrowers with poor credit.

Can I pay off a precomputed loan early?

Yes, you can typically pay off a precomputed loan early. However, because you pay more interest at the beginning of a precomputed loan, your savings will not be as big as they would be with a simple interest loan.

What is the difference between simple interest and precomputed interest?

The way simple interest is calculated is based on your loan balance on the day your monthly payment is due. As you pay down the loan, the less interest you owe. Precomputed interest is calculated over the length of the loan and then added to the principal amount. The interest is divided over the term of the loan in such a way that borrowers pay more in interest at the beginning of the loan.

Photo credit: iStock/FG Trade

SoFi's marketplace is owned and operated by SoFi Lending Corp.
Advertising Disclosures: The preliminary options presented on this site are from lenders and providers that pay SoFi compensation for marketing their products and services. This affects whether a product or service is presented on this site. SoFi does not include all products and services in the market. All rates, terms, and conditions vary by provider. See SoFi Lending Corp. licensing information below.

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

SOALR-Q325-079

People who are in a tight spot financially and looking to borrow a relatively small amount of money for an affordable vehicle might seek out a small car loan. Even with a small auto loan, the basics of car loans still apply. Additionally, lenders typically have stipulations for the minimum car loan amount you can borrow, as well as for the car you can purchase.

There are both pros and cons to small car loans, and different factors will affect the exact size of the loan you can take out. If your goal is simply to have lower monthly payments for an auto loan, you have various options available aside from small car loans.

What Is the Smallest Car Loan You Can Get?

Although specifics vary among lenders, your minimum car loan amount generally must be at least $3,000. Note that the selling price of the vehicle can be less than this, but the total amount financed must usually be $3,000 or higher. This is true even for subprime loans, a type of car loan designed for those with poor credit (meaning a score under 580).

The reason lenders have minimum auto loan amounts is to encourage borrowers to buy themselves a car with a certain reliability, so that maintenance costs aren’t excessively high and the vehicle is dependable enough to not break down over the course of the loan.

Recommended: 9 Tips for Buying a Used Car

What Factors Affect How Big of an Auto Loan You Can Get?

There are a number of factors that affect how large of an auto loan you can get. This can include:

•   Credit score

•   Debt-to-income ratio

•   Employment status

Auto lenders will require certain documentation to prove the information provided and to determine whether or not they will approve the loan. Documents necessary may include proof of identity, income, residence, and insurance, as well as vehicle documentation.

Recommended: Smarter Ways to Get a Car Loan

Pros of Small Car Loans

With the cost of living continually on the rise, buying a more affordable car can make sense for your financial situation. If you’re able to find a lower cost vehicle that’s dependable, using a small car loan to attain it can help you avoid the high debt payments that come with financing a more expensive vehicle.

Cons of Small Car Loans

Small car loans may seem convenient, but they come with several drawbacks. Lenders often charge higher interest rates on smaller loans, increasing the total repayment amount. Fewer lenders offer small car loans, limiting options for competitive rates. And finally, securing a small loan may require a strong credit profile or a significant down payment.

Recommended: Can I Have Multiple Car Loans?

Small Car Loan Requirements

As mentioned, most lenders have a minimum financing requirement around $3,000. In addition, most will require that you are purchasing a car that:

•   Is no more than 10 years old

•   Has less than 100,000 miles on it

•   Has a non-branded title (meaning the vehicle does not have a car title indicating it has previously suffered serious damage)

•   Is a passenger vehicle

Recommended: Second Chance Car Loans

Getting a Small Car Loan

When getting a small car loan, you’ll generally need to meet the following car loan requirements for small car loans:

•   Good credit score: Most lenders prefer a credit score of 600 or higher.

•   Proof of income: Demonstrating steady income ensures repayment ability.

•   Minimum loan amount: Many lenders set a minimum loan amount, usually around $3,000.

•   Vehicle value: The car’s value must meet the lender’s standards.

•   Down payment: A significant down payment may be required to secure the loan.

Recommended: Average Car Loan Interest Rate by Credit Score

Tips for Lowering Your Car Loan Payment

There are several ways you can lower your car loan payment aside from securing a small auto loan. This includes the following:

•  Save enough money for a large down payment so the total amount you’ll need to finance is lower.

•  Buy a used vehicle instead of a new one.

•  Research various lenders to ensure you’re getting the lowest interest rate possible.

•  Work to increase the value of your car you currently own before trading it in.

•  Opt for a basic model of your chosen car, leaving behind nice but ultimately unnecessary extras like heated seats or a leather interior.

•  Consider looking into how to refinance a car if you already have an auto loan but believe that market conditions or your improved financial situation could help you get a better interest rate on your loan. You also could opt to lengthen your loan’s term through refinancing to lower monthly payments.

Recommended: Pros and Cons of Car Refinancing

The Takeaway

Taking out a small car loan is an option available to borrowers who are looking to finance a low-cost vehicle that meets the requirements set by the lender. A lender’s requirements can dictate the minimum loan amount you must finance and the condition of the car you purchase. Meanwhile, a borrower’s financial situation, including their credit history and employment status, will influence how big of an auto loan they can take out.

That being said, taking out a small car loan isn’t the only way to secure lower monthly car loan payments. There are several choices a borrower can make to do so, including choosing a more basic model of a vehicle or saving up for a larger down payment. Refinancing an auto loan is another option available to lower the monthly payments.

If you’re seeking auto loan refinancing, SoFi is here to support you. On SoFi’s marketplace, you can shop and compare financing options for your car in minutes.

FAQ

What is considered a small car loan?

A small car loan typically refers to a loan amount of $10,000 or less. These loans are often used for purchasing inexpensive used cars or for buyers making significant down payments. Loan terms may vary, but smaller loan amounts usually result in lower monthly payments and shorter repayment periods.

How can you get a small car loan?

To get a small car loan, check your credit score, compare lenders offering small loan amounts, and apply for pre-approval. Look for credit unions, online lenders, or banks with flexible terms. A significant down payment and proof of income can improve approval chances and secure better loan terms.

What is the smallest car loan that you can get when refinancing your vehicle?

The smallest car loan amount available when refinancing depends on the lender, but it typically ranges from $3,000 to $5,000. Some lenders may require a minimum vehicle value or loan balance to qualify for refinancing. Check with individual lenders to find their specific minimum loan amount policies.

Photo credit: iStock/zamrznutitonovi

SoFi's marketplace is owned and operated by SoFi Lending Corp.
Advertising Disclosures: The preliminary options presented on this site are from lenders and providers that pay SoFi compensation for marketing their products and services. This affects whether a product or service is presented on this site. SoFi does not include all products and services in the market. All rates, terms, and conditions vary by provider. See SoFi Lending Corp. licensing information below.

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

SOALR-Q325-078

If you’re looking to make some passive income and you have an extra car that you don’t use very much, consider renting it out.

While there can be some monetary benefits to renting out your vehicle to strangers, there are also some real risks. Here’s a closer look at how to rent out your car.

What Is Car Renting?

Everyone’s familiar with Airbnb as a way for private citizens to rent out their homes, apartments, or even rooms in their house. About a decade ago, that model migrated to car rentals through websites like Turo or Getaround.

Turo and Getaround allow users to list their vehicle and rent it out to anyone looking for a car for hire, whether they need one to run to the grocery store for the afternoon or need it for multiple days for a getaway up the coast.

Recommended: 9 Tips for Buying a Used Car

Why Might You Consider Renting Out Your Car?

There are a number of reasons you might want to consider renting out your car. First, if you have an extra car that you rarely use, renting it out can be a way to earn extra cash without limiting your mobility.

If you work from home, you may need your car less. Making monthly payments on a vehicle you use infrequently may feel like a drain on your budget. Renting the vehicle out might help offset those costs.

Finally, demand for rental cars is up. This increased demand might mean you have an easier time renting out your own vehicle.

Steps to Rent Out Your Car

Ready to give it a try? Here are the steps to rent out your car:

1. List Your Vehicle

To list your vehicle, visit the website of a car-sharing service or download its mobile app. You’ll be asked for the make and model of your car, as well as a description of the vehicle and how much you’d like to rent it for.

2. Find Drivers

Drivers find you through a car-sharing app. They are often able to sort vehicles through various filters, including make and model, price, delivery fee, and other features. Drivers typically go through an approval process in which age and driver’s license are verified.

3. Complete the Transaction

Drivers book your vehicle directly through the car-sharing app, which handles the monetary transaction.

4. The Pickup

Some hosts will offer vehicle delivery for pick-up and return at private locations or frequent travel hubs like airports or train stations. Otherwise, drivers will have to go to the specific pick-up location to retrieve their vehicle. At this point, there may be a handoff of keys, or drivers may be able to electronically unlock the vehicle through an app.

5. Returning the Car

Drivers will return the vehicle to the specified return location. If they need the car for longer, or they want to return the vehicle early, they may contact you to make a request.

Recommended: Can Someone Take Over My Car Loan?

Options for Renting Out Your Car

Now that you know the steps for how to rent your car, you will likely want to use a peer-to-peer car-sharing app. Here’s a closer look at some of your options.

•  Turo: Turo claims to be the world’s largest car-sharing marketplace, with locations in the United States, Canada, the UK, Australia, and France. Most rentals require that drivers and hosts meet in person to exchange keys, as few rentals are able to be unlocked using the app. Hosts determine the rental pick-up and drop-off locations or offer a delivery service.

•  Getaround: Getaround is available in the United States and Europe. Rentals can be unlocked using the app, so hosts and drivers do not need to meet in person. However, rental owners will need to install the hardware that allows this system and pay a subscription fee.

Risks Associated With Renting Out Your Car

Yes, there are downsides.

Whenever you allow someone else to drive your car, there is a possibility of an accident, damage, or theft. Each car-sharing app offers some sort of protection plan for its owners, often in tiers that vary by coverage and expense.

The most expensive tiers offer the greatest coverage, but also take the biggest bite out of your profit. For example, at Turo, owners who accept 60% of the rental fee receive $750,000 in third-party liability insurance, Turo pays 100% of eligible damage costs, there is no deductible, there’s reimbursements for exterior wear and tear, and reimbursement for lost hosting income during repair.

Carefully examine the protection plans on offer before you sign up for a car share service. You may find that when you weigh the possible risks and rewards, you are uncomfortable renting to strangers.

Recommended: Ways to Increase the Value of Your Car

Car Financing Options

Some people choose to make peer-to-peer car-sharing a small business, buying a car or even a small fleet of cars to rent out. Unless you are able to buy the vehicle in cash, you’ll need to finance it through a bank or other lender, such as the dealership where you purchase the car.

Lenders will take a look at your credit history, including your credit score, to help determine the terms and interest rates they’ll offer. The better your credit history, the more favorable the terms.

If you’re renting out your car to increase cash flow, there are other options you may consider as well, including refinancing your car loan. It may be time to refinance a car if you’ve built your credit score or if interest rates fall. When you refinance, you pay off your old loan with a new one that has lower interest or better terms, making your payment cheaper.

Before refinancing, it’s important to consider the advantages and disadvantages of auto loan refinancing. In the pros column, you may be able to achieve a lower monthly payment or more favorable terms, and you may free up cash to put toward other financial goals. However, depending on your loan, you may be hit with prepayment penalties, your credit score may make a temporary dip, and it may be tough to find a lender willing to refinance.

It’s also important to consider the costs of auto loan refinancing, including early termination fees, transaction fees, registration fees, or title transfer fees.

Recommended: Refinancing a Car Loan: What to Consider

The Takeaway

Renting out your car can be a good way to increase passive income, especially if you don’t need the vehicle yourself. For some people, it can even be the beginning of a small home business. Before figuring out how to rent your car out, be sure to research your options for car-sharing apps and ensure that you are protected.

If you’re looking for other ways to increase your income, consider whether refinancing your vehicle could reduce the amount you pay each month or over the life of the loan.

If you’re seeking auto loan refinancing, SoFi is here to support you. On SoFi’s marketplace, you can shop and compare financing options for your car in minutes.

FAQ

Can you rent your car out?

Yes, you can rent out your car through platforms like Turo or Getaround. Ensure your car is well-maintained, set competitive pricing, create an attractive listing, and manage rentals effectively to attract renters and maximize earnings.

How do you rent out your car?

Sign on to the car-sharing app of your choice, fill in information about your vehicle, and the app will pair you with drivers.

Where do you rent out your own car?

The rental process is online. Drivers will pick up and drop off the car at a predetermined location, or owners may offer a delivery service.

Photo credit: iStock/FangXiaNuo

SoFi's marketplace is owned and operated by SoFi Lending Corp.
Advertising Disclosures: The preliminary options presented on this site are from lenders and providers that pay SoFi compensation for marketing their products and services. This affects whether a product or service is presented on this site. SoFi does not include all products and services in the market. All rates, terms, and conditions vary by provider. See SoFi Lending Corp. licensing information below.

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

SOALR-Q325-077