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Capital One's Rules Of The Road Survey Looks Back in Time, Baby Boomers Talk about Their First Cars, Offer Advice For First-Time Car Buyers

June 14, 2007 at 10:43 AM EDT

Parents to teens: "Do your research, do your homework, and shop around!"

MCLEAN, Va.--(BUSINESS WIRE)--June 14, 2007--Heading into days of summer, teens and young adults all over the country are preparing to make the single largest purchase of their young lives - their first car. In its annual Rules of the Road survey, Capital One Financial Corporation (NYSE:COF) asked them what they expect to experience - and then surveyed their parents, who bought their first cars three and four decades ago. Asking these 'older, wiser' car buyers about their first car-buying experiences evoked memories and advice for first-time car buyers today.

"Buying your first car is an exciting right of passage, but for many young adults, it's the first major financial decision of their lives," says Steve Schooff, spokesperson for Capital One. "Whether or not they contribute financially to the purchase, parents' experiences play an important role by helping their teens educate themselves and prepare for the transaction."

Advice from Mom and Pop

Although Mom and Dad admit to spending very little time researching their first car purchase, the most oft-quoted advice these baby boomers had for first-time car buyers today was, "Do your research, compare prices, and shop around." In fact, over a quarter (27 percent) of respondents said this would be their best piece of advice to today's first-time buyers. When teens were asked what advice they would most like to receive, 41 percent said they would want to hear, "How to do research, shop around, and where to buy a good, reliable car."

Sweet Nostalgia for the Classics...at Ten Times the Price

The survey results had a twinge of nostalgia for days gone by, like in 1972, when you could buy a car for less than one thousand dollars - a time when gasoline only cost $1.28 per gallon. The most popular first cars back then were all American - 50 percent of baby boomers said their first car was a Chevy or a Ford - the most popular: the Ford Mustang (1966) and Chevy Impala (1966-68). The Honda Civic, Honda Accord and Toyota Camry were the most popular among today's teens.

The survey also looked at what has changed in a generation in terms of financing a first-car purchase. The most dramatic difference, of course, is in the price of cars themselves. Most baby boomers (73 percent) said they paid less than $5,000 for their first car, with 40 percent paying less than $1,000. In contrast, 40 percent of teens today are saying they expect their first car to cost more than $10,000 - more than 10 times the amount their parents paid.

With prices so dramatically different, it is plain to see why most boomers (60 percent) say they paid cash. Financing options were slimmer back then and half of the respondents said they either did not have financing available to them, or their only other option was to borrow money from their parents. Only a small percentage (18 percent) remember having the option to finance through a bank or credit union. Today, more than half (57 percent) of teens surveyed said they are planning to finance the purchase of their first car.

Kelley Blue Book Consumer Advice Editor Jack Nerad says that first-time car buyers are dealing with a lot more than just a car's choice and price.

"Buying a car for the first time today involves many more variables than decades passed. Today's buyers also must navigate a sea of financing options and take out a car loan for the first time," says Nerad. "The good news is there are more financing options than ever before, but it is important for teens to take the time to understand exactly what a car loan is and shop around to understand what they are paying for and whether they are getting the best possible deal."

What Should First-Time Car Buyers Do To Get The Best Deal?

Capital One and Kelley Blue Book compiled a set of tips to give first-time car buyers the knowledge and confidence they need to manage the car-buying process - from choosing the right car to finding the right financing.

  • Learn about vehicle pricing - Research new and used car prices including dealer invoice pricing and transaction costs (the Internet can be a great resource). Know what you can afford and use those target numbers as a reference point for your pricing information.
  • Research and compare different financing options. There is a range of auto financing options available, including dealer financing, loans from banks and credit unions, and pre-approved no-obligation online loans. Researching your options and finding the lowest rate that you can qualify for can save you a substantial amount of money over the life of your loan. It's also critical that first-time buyers match the length of their loan to the planned length of ownership so that they do not become "upside down."
  • Treat the car-buying process as two separate negotiations. Determining the vehicle price and financing are two separate transactions, and you should negotiate each separately. This strategy will often help you save money. (If you happen to have a trade-in, consider it a third part of the negotiation)
  • Check your credit rating. Don't assume your teen or young adult does not have a credit history. Some parents have made their older teens authorized users of credit cards and cell phones, so it's important to obtain a credit report to make sure the information is accurate before buying.
  • Make sure you are comfortable with the contract. If it's not the price or deal you want, be ready to walk away.

    "Education is the key to ensuring you get the best possible deal on a car," says Nerad. "The baby boomers advice is based on years of experience, and taking the time to do your research and shop around can be the difference between a good deal and a poor one."

    Financial Education Help

    In an effort to help educate consumers, Capital One offers easy-to-understand consumer education resources on topics such as budgeting, establishing and building credit and protection against identity theft. Educational materials are free and can be accessed at www.capitalone.com/financialeducation. Tips to help consumers in their auto-financing search can also be found at www.capitalone.com/autoloans.

    Survey Methodology

    The findings reported in this release are from an online survey conducted by the survey opinion research firm, Braun Research of Princeton, New Jersey. Braun Research completed interviews with 402 parents between 45 and 55 years of age, all of whom own a motor vehicle. In addition, Braun Research conducted 222 interviews with teens age 17 and 23 who are planning to obtain their first motor vehicle in the next year. The interviews were conducted between May 12th through May 15th, 2007. The margin of error for this study is +/- 4.89 percentage points for the parents and +/- 6.6 percentage points (at the 95 percent confidence level) for the teens.

    Sampling for this study was conducted using a national sample of online panelists who were drawn at random. All panelists were invited to participate in the panel by invitation only. Statistical weights were designed from United States Census Bureau statistics.

    About Capital One

    Headquartered in McLean, Virginia, Capital One Financial Corporation (www.capitalone.com) is a financial holding company with more than 720 locations in New York, New Jersey, Connecticut, Texas and Louisiana that offer a broad spectrum of financial products and services to consumers, small businesses and commercial clients. Its principal subsidiaries, Capital One Bank, Capital One, F.S.B., Capital One Auto Finance, Inc., Capital One, N.A., and North Fork Bank offer a broad spectrum of financial products and services to consumers, small businesses and commercial clients. Capital One's subsidiaries collectively had $87.7 billion in deposits and $142.0 billion in managed loans outstanding as of March 31, 2007. Capital One, a Fortune 500 company, trades on the New York Stock Exchange under the symbol "COF" and is included in the S&P 100 index.

    CONTACT: Capital One
    Steve Schooff, 972-378-8105
    stephen.schooff@capitalone.com

    SOURCE: Capital One Financial Corporation