How Millennials’ Shifting Tastes Are Changing Car Buying
With young adults buying cars later in life, the National Automobile Dealers Association is keeping the industry aware of how generational differences in buying power and automobile preferences are affecting the purchasing process.
Those crazy millennials have been keeping the auto industry on edge—partly because they’re buying cars a lot later, and that caught dealers off guard.
But, after years of delay, auto dealers are finally seeing things turn a corner. According to an Associated Press report, millennials finally came into their own as car buyers, with people ages 21 to 38 buying 4 million vehicles last year. Research from J.D. Power’s Power Information Network found they represented second-largest group buying vehicles, after baby boomers.
Traditionally, it’s been believed that millennials have delayed buying vehicles by using public transit or ride-sharing services like Uber and Lyft. But Steven Szakaly, chief economist at the National Automobile Dealers Association, dismisses the notion that generation Y has figured out how to go car-free.
“This whole idea that they’re not going to need cars is absolutely ridiculous,” Szakaly explained to the wire service. “The new car buyer age is just happening much later.”
But while there’s a lot of potential for the market to grow, differences remain among age groups. One of them is buying power. Szakaly noted that millennials’ collective buying power, hurt by student debt and economic factors, may not match that of baby boomers for another five years.
In a news release last August, Szakaly explained the potentially negative effect that millennials, with their more modest incomes, could have on the auto industry.
“It will take four millennials to replace the spending power of one baby boomer in the automotive-retailing marketplace,” Szakaly said in the release, which nonetheless projected a period of growth in 2016. “There’s also a wage gap between baby boomers and millennials, and stagnating wages for millennials, along with increasing vehicle-transaction prices, will pose challenges in the long run.”
Sheryl Connelly, a futurist for Ford Motor Company, told the AP that the market shift may be tied to improved connectivity through technology—something that she said has made getting a car, or even a driver’s license, less important.
“The sense of freedom and independence that used to come with getting a vehicle has been arguably displaced by the cellphone,” Connelly said.