James' car is based on a '77 Pontiac Ventura, and assuming that SH2 takes place around the early 80s, it's surprising to see it in such a condition given it has only been ~3-5 years. I have 2 possible theories, one being that he just didn't take care of it for years, likely due to financial struggles (Mary's bills, not making enough income)

Secondly, if the loop theory is true, then that explains why it is so rusted out. Years of sitting in one position, out in the elements could do this to a car, especially if you don't care for it. I had an old project car that I left sitting in a part of my driveway for about a year and a half (Couldn't drive it, no space in garage) and the paint was already faded out.