MCLEAN, VA - 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, a subsidiary of Capital One Financial Corporation, 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,” says 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% 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% researched financing options online and 18% 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.”
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 U.S. 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 through 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.