Why Young People Are Buying More and More New Cars
Over the past several years, one of the most repeated bits of conventional wisdom is that millennials don’t buy cars. While owning a new car used to be a status symbol, it is widely believed that the youth of today are much more interested in smartphones, new shoes, and popularity on social media. Without the need for a car to give them social status, millennials are expected to soon abandon the automobile in favor of ridesharing apps, public transportation, and bicycles. America has apparently hit “peak car,” and before long, the automobile will only be found in transportation museums.
But it looks like that bit of conventional wisdom might not be as true as was originally thought. Bloomberg reports millennials accounted for 27% of new car sales last year. In 2010, that number was just 18%. That makes millennials the second-largest demographic of new car buyers, making baby boomers the only group that buys more new cars than millennials. As those boomers head into retirement, though, their share of the new car market will decline, leaving millennials on top.
Mark Reuss, General Motors’ head of global product development, told Bloomberg he never believed that millennials had moved past owning cars. He called that idea “insane” and went on to say millennials weren’t buying tons of cars because “they don’t have jobs. Our internal research says that they’ve only been able to afford used cars, if anything at all.”
While millennials have certainly been hit hard by the recession, the employment rate for 25- to 34-year-olds stayed at 76.8% for March, its highest level since November 2008. With better jobs and higher wages comes the money to finally buy cars. Plus, while millennials may have been able to get by without a car when they were younger, growing older often puts people in life stages when owning a car is much more important, especially in areas without reliable public transportation.
As advanced technology is finding its way into less expensive cars, not just high-end luxury cars, the cars that offer such technology are often the ones selling best to millennials.
“The idea of what kind of car people want is changing,” Haley Born, a 27-year-old Hyundai Elantra owner, said to Bloomberg. “It’s cool to have a Tesla, not cool to have an Escalade.”
While a Tesla is still out of reach for most millennials, features like Bluetooth, backup cameras, voice control, and even adaptive cruise control aren’t. Even better, inexpensive new cars offer excellent fuel efficiency without sacrificing horsepower. That means they’re not only better for the environment but are easier on budget-conscious buyers’ wallets. Plus, many cars also come with excellent warranties, and low-interest, long-term financing can make buying a new car hard to turn down.
Millennials who choose to forego buying new cars haven’t necessarily given up on car ownership altogether. For the ultra budget-conscious shopper, a well-maintained used car can be had for only a few thousand dollars. Then again, for the more aspirational buyer, the $15,000 to $20,000 that a subcompact hatchback might cost can also buy a very nice used luxury or sports car. Even if the new version costs twice their yearly salary, millennials can easily own some very nice cars if they take advantage of depreciation.
Car-buying tastes may be changing, and savvy shoppers may be looking to the used market for now, but millennials are still buying cars. Cars take money to buy, however, and between the record-setting levels of student debt millennials hold and their high unemployment rate, it’s no surprise that they weren’t buying a lot of new cars in 2010. Like with most situations, the future of millennial car buying is not all doom and gloom. In fact, considering the upward trend over the past five years, millennials could soon end up buying more cars than anyone else.