Many young first-time car buyers are making one of the biggest purchases of their lives without parental advice and without knowing their own credit scores, according to a new survey by Capital One Auto Finance.
The survey, conducted by Braun Research, found that:
- More than half of those surveyed (52 percent) said their parents have not discussed budgeting for car expenses
- 64 percent say their parents have not talked to them about financing options
- More than half (56%) expected to finance their purchase, and nearly 82 percent of car buyers were aware that their credit scores could impact the interest rates they would be offered. Yet a whopping 72 percent of those who planned to finance their first car purchase had never checked their credit reports or credit scores.
Capital One’s findings are based on an online survey conducted by Braun Research of Princeton, NJ., which completed interviews with 404 parents between 45 and 55 years of age, all of whom have at least one child and own a motor vehicle. Braun Research also interviewed 400 young adults between the ages of 18 and 25 years of age who are planning to buy their first motor vehicle in the next year. The interviews were conducted between May 1, 2009 to May 13, 2009. The margin of error for this study is ± 4.9 percentage points for each group.
Now, it’s entirely possible your parents aren’t the best source for information on the car purchasing process, given how many older people overspend on cars. But if you’re going to borrow to buy a vehicle, you darn well better understand what you’re getting into.
- Knowing your FICO scores (available for about $16 apiece at MyFico.com) and what interest rate those should get you
- Setting your own limits on how much you will borrow (preferably making at least 20% down payment, with a loan no longer than four years and a payment of no more than 10% of your gross income)
- Getting approved for a loan first at your local credit union, so that you don’t have to rely on dealer financing (but you can still take advantage of a better deal, if the dealer offers one)
For a wealth of information on negotiating a car purchase, check out Edmunds.com and see these columns for more financial tips:
- 7 fast fixes for your credit scores
- Should you buy from a dying automaker?
- What a car wreck could cost you