By on May 1, 2015

Chevrolet Sparks In A Row Circa August 2013

Millennials giving up on cars? Not according to a recent J.D. Power study.

The study found a 118 percent increase in new-vehicle purchases by the group — defined by J.D. Power as those born between 1977 and 1994 — between 2010 and 2014, Fusion reports. The jump blows away sales increases among Gen-Xers and Boomers at 57 percent and 31 percent, respectively.

Within the period, millennials bought 3.7 million new vehicles last year, compared to just 1.7 million in 2010. The increase also merits a jump in their share of overall new-vehicle purchases, coming out to 28 percent versus 24 percent for Gen-X and 37 percent for Boomers.

Despite this, the group is continually cash-strapped. Only 8 percent of sales are made with cash, according to J.D. Power. Thus, millennials are turning toward financing their new vehicles, with 40 percent accounting for all loans with terms of six years and above.

Their rides are also reflective of what’s in their wallets: millennials make up 30 percent of overall compact vehicle sales, and 25 percent of small car transactions. Average purchase price for a vehicle by a member of the group is $29,998.

Though there is a lack of data to compare millennial buying trends to those of older generations when the latter was their age, automotive analytics director Tim Dunne says the size of the millennial generation is helping to increase its share of new-vehicle sales over Gen-X, adding more members of their cohort are likely buying used over new.

[Photo credit: Daniel Oines/Flickr/CC BY 2.0]

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40 Comments on “JD Power: Millennials Buying More New Vehicles Than Expected...”

  • avatar

    “analytics director Tim Dunne says the size of the millennial generation is helping to increase its share of new-vehicle sales over Gen-X, adding more members of their cohort are likely buying used over new.”

    Orly? You need to be an analytics director to figure that out? More people coming of age equals more car sales. And used cars are cheaper than new. Also, in 2010 several years of this generation (as defined by JD Power) weren’t even old enough to buy cars on their own.

    Just brilliant. And there are about 50 used models I’d pick before choosing to dump my money on a new Spark.

  • avatar

    I’d like to know what the relative gross profit to both the OEM and the auto dealer these sales represents. That has more impact on the market than number of vehicles purchased. Of course, entry level vehicles is where an OEM begins, trying to forge a relationship to maintain loyalty, something much more difficult to do now than in previous generations. OEMs and dealers will take whatever they can get based on the perception of future prospects. If not for that the sales unit numbers don’t carry much weight.

    • 0 avatar

      Small cars have smaller profits, but beyond that I’ve found that my younger customers are more likely to use a buying service or other online research and know pretty well what a good deal is. They also are much more likely to buy service plans and extended warranty. Going along with the article, they like to finance things and have a set payment, rather than having cash on hand to pay for repairs and maintenance (which seem to have a growing perception of being a repair).

  • avatar

    Damn, enough with all the millennial stories.

  • avatar

    I’d like to see a breakdown of Millennial purchases by funding type. i.e. paid in full, loan terms 5yrs, etc…

    I strongly suspect growth in Millennial car-buying correlates with growth in loan terms and subprime auto loans.

    Most of this article is BS (re: economic recovery) but at least it highlights the issue of auto loans growing:

    And a WSJ article from last year:

    • 0 avatar

      Correlates or is caused by?

      In 2009, credit had mostly dried up. From that point, all kinds of financing has increased. Moving from a 10.5 million SAAR to 17 million might also cause some loan growth.

      Sub prime car loans remains at about 40% to 15% of total outstanding car loans. Nothing to be alarmed at. The Great Recession maimed many credit scores. Buy Here Pay Here and sub prime is helping millions rebuild their credit histories while still have a car to drive to work.

      While there has been some extension in term, the resurgence of leasing means many are on short term contracts.

      So is the recovery a mirage?

      • 0 avatar

        “So is the recovery a mirage?”

        What recovery? Labor force participation rate is at a 38-year low, not to mention labor underutilization (burger flippers with chemistry degrees etc.). Jobs are largely going to older, experienced workers instead of the new graduates we need to keep the economy functioning down the line. Home ownership has plummeted and rental prices are high so what little money people are bringing in is increasingly spent putting a roof over their heads.

        • 0 avatar

          So because it isn’t perfect it isn’t good? We were losing 850K jobs a month at one point. The DOW alone has restored over $25 TRILLION of mostly American wealth. Credit was once frozen. It isn’t today. Mortgages aren’t as easy to get as they once were, and that’s a good thing. But household net worth has taken a HUGE jump since it suddenly lost 38%. That loss of household net worth caused consumers to refrain from consuming. Things are obviously on the move. Just take the auto market. From a low of 10.5 million to 17 million.

          What exactly do YOU think “recovery” should look like?

          When was it ever perfect? Recovery will never be “complete.”

          • 0 avatar

            “The DOW alone has restored over $25 TRILLION of mostly American wealth. Credit was once frozen.”

            The stock market has little or no bearing on the real economy. All it does is drive up capital gains (and asset prices, like luxury real estate) for those already ultra-rich. Courtesy of central banks all competing to print the most monopoly money to maintain the facade of economic health.

            “What exactly do YOU think “recovery” should look like?”

            First off, I don’t think the global economy will ever properly recover without major transnational chaos or a breakthrough in fusion tech. Automation reduces the need for human labor, yet populations continue to grow. Our ability to generate resources is limited by our energy production methods. So we have more and more people to spread a (fairly) limited resource pool amongst, and an economic system where everyone is expected to work to earn resources, but there is less and less work required to keep civilization churning along.

            But what should a short-term national economy recovery look like? I’d say…
            -REAL wage growth
            -rising adult labor force participation
            -high hiring rates for young workers
            -declining default rates on consumer debt
            -Hell, a stark decline in consumer debt. If the economy is good, and your business is good, your income will significantly exceed your expenses and you can pay CASH for your depreciating trinkets.

            -oh, and…deflation! Technological process = costs for a given level of performance declines = stuff gets cheaper. The clearest example of this is the comparatively-unregulated consumer electronics sector. 1GB of RAM or SSD drive space costs SIGNIFICANTLY less than it did 10 years ago. Since this is a car site, HORSEPOWER is another good example. 350+ hp passenger vehicles cost far less in real terms than they did 40 years ago.

            “Recovery will never be ‘complete.’ ”
            I’d say a complete recovery would be one in which a particular set of metrics equal or exceed their values at a chosen point earlier in time.

            “is that what passes for a conversation these days? posting links from a loser site like zerohedge?”

            Those ZH links contain data pulled from the Bureau of Labor Statistics, Gallup Polls, the US Census, and Bloomberg. Which you would know if you actually bothered to *read them*, instead of simply dismissing the messenger and failing to contribute any data from your own sources.

            “It’s what all the cool kids read down at the asylum.”

            If you have conflicting data from reputable sources by all means feel free to share it.

          • 0 avatar

            RE: “The stock market has little or no bearing on the real economy.”

            When I pick myself up off the floor from laughing I’ll decide if this bears a response.

    • 0 avatar

      is that what passes for a conversation these days? posting links from a loser site like zerohedge?

  • avatar

    So millennials love debt and can’t resist buying new shiny things, just like their parents! Who knew!

  • avatar

    Surprise, surprise. We don’t just sit at home and stare into our phones, you know. Sometimes, we feel the need to strap ourselves into 3,000-pound death traps…while staring into our phones…

    • 0 avatar

      That’s right, Kyree, ’cause there’s no better place to do texting than while one is hurtling along at seventy in dense traffic. We may be in the Bible Belt, but those bowed heads aren’t in prayer. They’re so busy with their phones they have no time to read “don’t text and drive” billboards.

  • avatar

    Shouldn’t this be obvious…?

    The data covers purchases between 2010 and 2014. In 2010, a third of the generation was of high school or college age. A lot of them would have finished college by 2014. More people of working age -> more people buying cars (and needing to borrow money to do so because, hey, they just started working).

    Besides that, everyone’s job was looking threatened in 2010, and in 2014 a number of industries started getting busy again.

    Surely the professionals have more interesting facts for us.

  • avatar
    Big Al From 'Murica

    As a Gen Xer all of these millenieal articles are making me feel old. I fully expect to be asked “Wouldn’t you rather be driving a Buick?” any day now.

    And incidentally, 30 grand is more than I have ever spent on a vehicle, new or used. My last two only broke 20 for the first time. I may have 30 grand in a couple of them counting crate motors and what not, but never off the showroom floor. Thank god vor the little CUV boom or my wife’s next car would probably break that streak.

    • 0 avatar

      Well, wouldn’t you rather drive a Buick? ;-)

      Buick does have some fans on this board. I’m not one of them, but they have a place.

      P.S. These marketing cohort labels are are annoying to me to. The real difference is growing up with the Internet. Thus, I hope to label myself and people younger than me “the Internet Generation”. Because that actually means something.

  • avatar
    Big Al From 'Murica

    As a Gen Xer all of these millenieal articles are making me feel old. I fully expect to be asked “Wouldn’t you rather be driving a Buick?” any day now.

    And incidentally, 30 grand is more than I have ever spent on a vehicle, new or used.

  • avatar

    So in other words, the recent crop of 20-37 year olds bought twice as many new cars as they did when they were 16-33. Fair enough, but it’s not exactly shocking to learn that many of these people were not in the new car market when they were teenagers.

    • 0 avatar
      Lack Thereof

      I’m a millennial, and it doesn’t surprise me.

      My generation has reached the age where we are getting married and having kids – or at least planning for kids. For a lot of millennials, that means it’s time to trade in our old beaters that got us through our teens and 20’s for respectable family cars.

      I’ve talked my wife into letting us stretch our old Cavalier for another 5 years. At the end of those 5 years, though, we are likely to have a child in gradeschool, and thusly to be in the market for a hatchback or wagon.

      Meanwhile the older generation is becoming empty nesters, and are losing the pressures of parenthood that drove most of their car purchases.

      • 0 avatar

        I was being somewhat sarcastic. My point was that the statistic was a bit bogus, given the age ranges in the base year (2010.) Not many high school kids are shopping for new cars, yet they’re included in the first figure.

      • 0 avatar

        Asking your wife for permission to not replace a Cavalier is like her asking permission to not get her nails and hair done. That’s a pretty unique relationship.

    • 0 avatar

      Excellent point.

  • avatar

    Assuming that Millennial births are uniformly distributed by year, the percentage of Millennials of prime car buying age 24 and higher (two years out of college) increased from approximately 50% in 2010 to 75% in 2014. A combination of improved job market and 50% increase in buyers makes the doubling of sales almost a non-story.

    • 0 avatar

      I don’t know if 24 is the ideal age, but your guesswork about the growth rate is accurate.

      In addition, the total number of people in the second group would have been higher than the first due to net migration. (The deaths and emigration among them would have been offset by immigrants.)

      The factoid itself is fine, but it probably doesn’t mean much of anything. It sounds more impressive than it is.

  • avatar

    I call bull on this article. The findings from this must be from people that are in their 30’s I know no one in my age group thats buying a 30k car unless they are getting some serious help from their parents (which there are plenty of those) or they are already established in their 30’s. From my own research with my age group buying cars, I found the average price ranged from 13-18k which sounds more realistic than JD’s findings.

    • 0 avatar

      It’s certainly not the norm, but I am in my early 30s and bought new cars cash when I was 22 and 28. The first car was less than $20k, but the second was over $40k. I know the job market isn’t wonderful for people in their 20s and early 30s, but not everyone is struggling. I have plenty of friends who bought average to above average priced cars in their late 20s after finishing grad school.

  • avatar

    So people 20-35 buy more new cars when credit is available than 15-30 year olds do when credit is tight.
    How much did they charge for this incredibly profound little tidbit?

    Now I feel like a cheapskate… I have never paid more than 6000 for a car, at least at the outset.

  • avatar

    What about us Boomers? We have money! We like those big Cadillacs, Buicks, and Caprices with bench front seats, that are easy to get into an out of! Oh! They don’t make those anymore. I’d better hold onto my 2005 Buick LeSabre.

    • 0 avatar

      GM would be more than happy to move you into a new Escalade.

    • 0 avatar

      I’m late boomer or early millennials. when I was mid 20s with small budget, there were millions of nice choices of used cars of 5-10 years old at affordable prices.
      BMW E36, Japanese sport cars from golden ages for example.
      Today, 10 year old once nice cars are mostly loaded with broken outdated gadgets, ancient LCD screens, melted soft plastic interior trim.
      Most people will rather buy new econobox with latest smartphone linked stuff placed in the middle of console.

  • avatar

    Hmm, evidently I am a millennial. It seems like everyone uses a different cutoff, but under JD Power’s I just make it.

    Using such a big age range – 17 years – makes the data pretty much useless. The buying power and preferences of a 21 year old and a 37 year old are so different that putting them in the same category proves nothing. It would be much more interesting to see this by year or by 3-5 year chunks

    • 0 avatar

      It’s reasonable to look at this way in that this is considered to be a generational group and it is valuable to marketers to measure how they behave.

      Where it goes wrong is when the data that comes from this is taken out of context. The doubling of purchases is not actually that big of a deal when all of the facts are taken into account; it would have been surprising if they hadn’t increased that much.

      • 0 avatar

        But it isn’t valuable to marketers, because it’s so broad as to be useless as a measure of how people behave.

        You can lump, say, boomers together, because a 55 year old and a 75 year old probably have similar preferences. A 35 year old and a 22 year old, not so much.

        • 0 avatar

          Actually there’s a much bigger gulf between a 55 and 75 year old than you imagine.

          You can blame a French statistician from the late 18th century for the long generations. He determined that a new majority of the population emerged every 19-1/2 years. People have been using that number for a “generation” ever since.

          The boomers are actually three generations in one, with the lead group being the GTO generation; the middle group the Pinto generation; and the last group the Citation generation.

          Pick the first year of birth of any generation, then the middle year and finally the last year, and add 18, plus or minus a couple years. That’s the midpoint of each sub-group’s experience.

        • 0 avatar

          The value is in tracking the behavior of a group over time. Over their life cycle, their consumption habits will change.

          Marketers have a lot more data than this. Just because you didn’t read it in this blog article does not mean that the professionals don’t have the information.

          It’s the media and the readers who are prone to taking a single data point and misinterpreting it. The data itself is fine; it’s the tendency of the amateurs and outsiders to take it out of context that is the problem.

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