Capital One Financial Reveals Car-Buyer Study Results
MCLEAN, Va. — As summer is in full swing, teens and young adults throughout 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 Corp. asked these young adults what they expect to experience when purchasing a vehicle — and then surveyed their parents, who bought their first cars three or 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, Capital One pointed out.
"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," explained 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," he continued.
Although mom and dad admit to spending very little time researching their first car purchase, according to Capital One, 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, more than a quarter, or 27 percent, of study participants said this would be their best piece of advice for today's first-time buyers.
When teens were asked what advice they would most like to receive, Capital One discovered that 41 percent said they want to hear, "How to do research, shop around and where to buy a good, reliable car."
Sweet Nostalgia for the Classics
The survey results had a twinge of nostalgia for days gone by, like in 1972, when a consumer could buy a car for less than $1,000 — 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, Capital One reported. The most popular first-time vehicles were the Ford Mustang (1966) and Chevy Impala (1966 to 1968).
However, in today's society, the Honda Civic, Accord and Toyota Camry were the most popular among today's teens, according to the study.
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. 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 said they expect their first car to cost more than $10,000, which is more than 10 times the amount their parents paid, executives said.
With prices so dramatically different, it is plain to see why most boomers, 60 percent, reported that they paid cash for their first vehicle.
Fewer financing options were available 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 of those questioned, 18 percent, remember having the option to finance through a bank or credit union, officials said. Meanwhile, 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 noted 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," he explained.
"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," he continued.
The results were based on online survey conducted by an opinion research firm, Braun Research of Princeton, of N.J. 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 12 to 15, 2007.
Financial Education Help
In an effort to help educate consumers, such as young adults, Capital One said it offers easy-to-understand consumer education resources on topics such as budgeting, establishing and building credit and protection against identity theft.