It’s a refrain you hear quite a bit on the news; people under 30 just aren’t driving as much. They aren’t buying cars, they aren’t getting on the road, and what does this mean for the auto industry? Well, as it turns out, it’s not that they aren’t buying cars … they just needed to wait to be able to afford them.
TransUnion recently surveyed a recent swath of auto loans, looking specifically at buyers who ranged in age from 18 to 34; for marketing purposes, the oldest “Millennial” was born in 1981. They found some rather interesting data, starting with the fact that contrary to popular industry wisdom, Millennial car buying is on the rise, moving from 16% in 2009 to 27% in 2014. Needless to say, an increase of 11% in five years is fairly substantial, but it does leave some analysts wondering why it took Millennials so long to start buying cars.
Part of this is simple trending; as any generation ages, it begins buying cars in earnest. The same was true of Generation X and the Baby Boomers. And, in truth, Generation X, which was born starting in 1965, actually still anchors the car market with a third of all loan originations. Essentially, people with jobs and stability are, unsurprisingly, more likely to buy cars. But the Millennial generation faces problems and setbacks that make these numbers somewhat surprising.
Simply put, many Millennials arrived on the job market right when the jobs were drying up. College graduates looking for work in 2008 and beyond found a tough market where they had substantial competition from older, more experienced workers. Many Millennials had to take jobs to fill the financial gap, and began struggling with student loans, building a career, and generally keeping their lives on track in the wake of severe economic difficulty.
As time has gone on, though, the economy has stabilized and things have improved for Millennials. As a generation, they still face substantial economic problems; for example, they hold a stunning amount of student loan debt, and as a group, their wages have not been growing at the same pace as older groups. However, there’s another factor that’s much stronger than any other form of economic incentive, and it’s fairly simple: They need their cars to get to their jobs, pick up their growing families, and otherwise live their lives.
That’s reflected in the cost of the cars Millennials buy; while the average cost of a new car is over $31,000 in America, the average car loan for a Millennial in 2014 was just around $18,000. And automakers are noticing a distinct trend among Millennials, who prefer cars that are not only wallet-friendly on the sticker price, but lighter on gas or even avoiding using gas altogether; green-technology cars are becoming increasingly popular among younger buyers.
This will present interesting issues to automakers and auto lenders as Millennials develop their careers and find themselves with more money to spend. But for now, they can remain happy that Millennials are buying cars, after all.