Consumers who are venturing into the car buying market for the first time generally do not have enough cash to purchase a vehicle. This situation means they must research financing alternatives before signing a contract. These buyers also need to consider the total cost of ownership before they make a decision. But a recent survey from Capital One Auto Finance shows first-time car buyers lack the information they need to make a financially responsible decision.
According to the Seventh Annual Rules of the Road Survey from Capital One Auto Finance, when first-time car buyers begin the purchase process, they typically follow these steps:
- Compare prices/makes/models 70%
- Develop a budget for payments and consider how it fits into the rest of the budget 53%
- Stick to the budget they set 88%
But first-time buyers frequently underestimate the true costs of car ownership because they neglect to consider:
- Cost of maintenance/repairs 47%
- Parking and registration costs 45%
- Actual interest rate on loan 48%
To help consumers make the best possible decision when buying a car for the first time, Capital One recommends that consumers separate the buying process from the financing process. In addition, consumers should check their credit score ahead of time, learn how vehicle pricing works and compare financing options.
Financial services companies that offer auto loans may begin marketing programs to help buyers understand the financing process. These kinds of services position the lenders as responsible and helpful and may increase their auto loan business from first-time buyers.[Source: Many First-time Car Buyers Researching on Front-end, Yet Unprepared for Costs. Capital One. 24 Jun. 2010. Web. 13 Jul. 2010]