Young Adults Navigate Economic Challenges, Auto Financing Options on Their Own
As young adults prepare for this important first purchase, the Capital One Auto Finance survey found that many young people are navigating the car-buying process by themselves, with more than half of those surveyed (52 percent) reporting that their parents have not discussed budgeting for car expenses nor have they discussed auto financing options (64 percent) with them. With so many young adults finding the way on their own, the one piece of advice most baby boomers would offer when purchasing a first car is to do your research, compare prices, and shop around.
“Buying a car is not an intuitive process and it can be intimidating for
first time purchasers, especially in such a challenging economic
environment,” said
Capital One Auto Finance’s survey also compares the expectations of
today’s first time car buyers with the experiences of baby boomer
parents. Some of the most surprising results show that boomers and
today’s young adults aren’t so far apart and that practicality is as
important today as it was 30 or 40 years ago. Both groups named price as
the most important factor in car buying decisions (49 and 41 percent
respectively), and while car prices have increased significantly over
the years, it is surprising that the young adults surveyed predict that
their first car will cost within the same
In terms of paying for their new wheels, 65 percent of today’s young buyers expect to follow in their parents’ footsteps by paying for their first car themselves. Most also report that they plan to pay for their first car in cash (44 percent), up from 29 percent in 2008. Despite numerous financing options available to today’s young adults, fewer plan to take advantage of the benefits of bank financing (24 percent) than just a year ago (41 percent). While the vast majority of the young adults surveyed (nearly 82 percent) were aware that their credit score could impact the interest rate they would be offered, unpredictably, 72 percent of those who planned to finance their first car purchase through a bank or dealership had never checked their credit report.
“The troubled economy has definitely impacted car buying decisions,” Yajnik said. “At the same time, there are incredible deals available at dealerships 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 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.”
Helping Young Adults Navigate Car Buying in a Tough Economy
Capital One Auto Finance developed the following tips that parents can share with young adults to help develop the confidence they need to manage the car-buying process:
- 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 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: 1) vehicle price, and 2) 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 young adult does not have a credit history. Some parents have made their older kids 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.
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 www.capitalone.com/autoloans. The guide’s topics range from budgeting, to learning about vehicle research and shopping, to understanding financing and payment terms.
Survey Methodology
The findings reported in this release are from an online survey
conducted by the survey opinion research firm,
Sampling for this study was conducted using a national probability
replicate sample for the 48 state contiguous
About Capital One
Source:
Capital One Financial Corporation
Steve Schooff, 972-295-1676
stephen.schooff@capitalone.com