Many First-Time Car Buyers Researching on Front-End, Yet May Be Unprepared for Costs of Ownership Down the Road
MCLEAN, Va., Jun 24, 2010 (BUSINESS WIRE) --The economic downturn has made consumers much more aware of how they are spending their money and more diligent in their preparations before making major purchases like a first car. The Seventh Annual Rules of the Road Survey from Capital One Auto Finance (www.capitalone.com/autoloans), a subsidiary of Capital One Financial Corporation (NYSE:COF), found that most first time-car buyers carefully research and budget prior to making their purchase. Despite their efforts to be prepared however, many may not have fully thought through the long-term secondary costs of owning a car or fully utilized valuable research tools and financing comparisons that could save them money over time.
Capital One's survey found that the majority (70%) of first-time car buyers surveyed did their research, comparing prices and various makes and models of vehicles before making a final decision to purchase their car. To prepare for this important purchase, most first-time car buyers (53%) also developed a budget to help them determine what they could afford and how they would make payments or manage other expenses. And of those who set a budget, the vast majority (88%) said they stuck to it when they purchased their car.
"Buying a car is a big commitment and consumers have numerous choices, which can make the process seem a bit intimidating. The first step for any potential car buyer should be researching the cars that might be right for them, which often can be done online," said Sanjiv Yajnik, President of Capital One Auto Finance. "But first-time car buyers should do more than just compare make, model and price. Investigating financing options, insurance companies, and warranties all must be approached in a similarly diligent manner."
Despite all of the research done by first-time car buyers on the front end of the purchase, the survey shows that even a seemingly scrupulous new car owner can get into trouble after driving off the lot. More than half (63%) of the first-time car buyers surveyed thought they accurately calculated the true cost and expenses of buying a vehicle, yet nearly half of respondents say they did not factor in their calculations the cost of maintenance and repairs (47%) or registration and parking (45%). Of those surveyed who got a loan to purchase their car, nearly half (48%) do not know the interest rate. While 61 percent researched different models and types of vehicles before making their purchase, only one-third of respondents say they checked their credit score.
In terms of financing options, the survey found that most first-time car buyers were uneducated in this area, with most (59%) reporting that they had not had anyone discuss financing options with them and how auto financing works. Before purchasing their vehicle, over half (54%) of those surveyed did not know that you could go online to compare financing options and most respondents (57%) did not know that you could go online to apply for a loan for a new vehicle. Only 20 percent researched financing options online and 18 percent went online to research different lenders.
"It is important that first-time car buyers do their research and factor all elements of car ownership into the purchase price before moving forward with a decision," said Yajnik. "There are incredible deals available across the country and a range of financing options are available. Armed with the right information, it is an excellent time to get a great deal, but it is important for first-time car buyers to take the time to think through additional auto expenses beyond the sticker price, understand exactly what a car loan is, calculate what they can afford, understand financing options, and not to be forgotten - know their credit score and how that score could affect the terms of their loan."
Tips for First-Time Car Buyers
Capital One Auto Finance developed the following tips to help first-time car buyers manage the car-buying process:
Financial Education Help
Capital One Auto Finance offers car buyers a range of information and tools to educate themselves, including a free, easy-to-understand consumer auto buying guide available at http://www.capitalone.com/autoloans. The guide's topics range from budgeting, to learning about vehicle research and shopping, to understanding financing and payment terms.
The findings reported in this release are from a telephone survey conducted by the opinion research firm, Braun Research of Princeton NJ. The survey was sponsored by APCO Worldwide of Washington DC. Braun Research completed 700 interviews with US resident adults age 18 and over. All interviews were conducted by telephone. All interviews were with one household member only selected at random. The interviews were conducted from May 13, 2010 thru May 19, 2010. The margin of error was 3.70% at the 95% confidence level. The overall response rate was 23%. Interviews were monitored at random.
Sampling for each study was conducted using a national probability Replicate sample for each state. All interviews were conducted using a computer assisted telephone interviewing system. Statistical weights were designed from the United States Census Bureau statistics.
About Capital One
Capital One Financial Corporation (http://www.capitalone.com) is a financial holding company whose subsidiaries, which include Capital One, N.A. and Capital One Bank (USA), N. A., had $117.8 billion in deposits and $200.7 billion in total managed assets outstanding as of March 31, 2010. Headquartered in McLean, Virginia, Capital One offers a broad spectrum of financial products and services to consumers, small businesses and commercial clients. Capital One, N.A. has approximately 1,000 branch locations primarily in New York, New Jersey, Texas, Louisiana, Maryland, Virginia, and the District of Columbia. A Fortune 500 company, Capital One trades on the New York Stock Exchange under the symbol "COF" and is included in the S&P 100 index.
Headquartered in Plano, Texas, Capital One Auto Finance, Inc., (http://www.capitalone.com/autoloans), is a full-credit spectrum auto lender which offers a wide-range of auto finance products. Capital One Auto Finance is the nation's fourth largest independent auto lender as well as the nation's largest direct mail and online vehicle financing provider with outstandings of $17.4 billion as of March 31, 2010. Capital One Auto Finance is a subsidiary of Capital One, N.A.
SOURCE: Capital One Financial Corporation
Julie Rakes, 804-284-5800