Something I’ve long maintained (and that has been backed up by many of the B&B) is that young people still like cars and do care about them. The issue of falling car ownership among young people is largely an economic one. The cost of living is going up while wages are stagnating. Gasoline is expensive. Student debt, smartphones and rent are more important obligations than car payments, insurance and fuel. All of that can be quantified with data.
What hasn’t been so easily demonstrable was that young people still like cars, despite the wishful thinking of many who cheer for the end to the automobile era. Now we finally have some good research that backs up my gut feeling.
A new study by Edmunds shows that not only are more Millennials buying new cars, but they aren’t opting for the usual old boring appliances either. Using data from Polk, Edmunds discovered that the number of 18-34 year-old buyers is rebounding – not quite to pre-recession levels, but improving steadily from 2011 to 2012. And it looks to be holding steady this year.
According to the Edmunds study, Millennial buyers tend to buy a greater share of luxury and sporty cars as well – segments that are traditionally the domain of older buyers with disposable income that can be spent on a car. This is another notion that has long suffered from an absence of hard data, but I can tell you that the rationale behind this is simple; if we’re going to shell out for a car, it’s going to be something that we really want, like a Scion tC (yes, lots of people want those, even if we don’t) or a Hyundai Genesis Coupe, rather than a more utilitarian car.
The study isn’t entirely rosy, and it highlights a number of roadblocks that could continue to derail car ownership for Generation Y
For starters, the job market remains very tough for under-25 crowd. Double digit unemployment rates persist for the youngest segment of the labor force despite that fact that its labor force participation rates have continued to fall and are at their lowest levels since at least 2003.
Meanwhile, the older Millennials — the 25 to 34 year olds — continue to struggle with slow income growth. From 2010 to 2011 (the most recent year available), their median household income grew 1.8 percent but as in the previous three years, failed to keep pace with inflation. This growth rate is particularly concerning since the older Millennials tend to be in the first ten years of their careers, the period during which 70 percent of raises typically occur.
The Millennials’ job and income issues are compounded by the fact that they are entering the workforce with significantly more student loan debt than previous generations. This higher debt burden impedes their ability to qualify for other loans, including car loans.
Not mentioned is the rapid expansion in credit and auto loan terms – are younger consumers with lower incomes taking on 72, 84 or 96 month term loans to help them afford that FR-S or 328i? It’s certainly plausible, but again, without hard data, it’s little more than a theory.
Over at Automotive News, Mark Rechtin wrote an equally insightful rebuttal to the latest study that posits that Generation Y are eager to reject cars and home ownership for an urban lifestyle of renting and Brooklyn Bohemianism. Rechtin delicately puts forward what we all know in the back of our minds; one day, we will turn into our parents and trade in the chic loft in a gentrified neighborhood for new digs that are more suitable for raising a family. These will likely be in the suburbs, and will necessitate a car.
But before that, they will grow up
Young people do care about cars. They just haven’t had to. Either unemployed or underemployed, many Gen Y college grads have moved back home with their helicopter parents who have resumed their role as their childrens’ personal taxi services. Gen Ys can’t afford cars, but they can afford iPhones.
If Edmunds is correct, then this is all set to change. The economy will recovery, good jobs will return for America’s youth and the dream of a middle class life will start to become a more realistic goal for the 70 million young people who constantly uncertain about their future. I certainly hope it happens. The alternative is extremely ugly.