As millennials graduated high school, went to college, tried to find jobs, settled for underemployment, and eventually obtained something resembling a decent career, various media outlets discussed their coming of age with careful research and rational analysis. Just kidding! They freaked out and blamed the younger generation for killing everything, including cars and car culture. Turns out none of that was true. Millennials buy cars.
And they’ll be buying cars well into the future. The question is, what’s Gen Z gonna do?
Despite being labeled as the age cohort that would kill cars, millennials are actually responsible for keeping them alive. Basically, once younger adults obtained stable employment and started families, they shopped for cars. And they’ll keep purchasing vehicles as they get older. Millennial purchasing power will greatly impact the auto industry. In fact, their car buying appetite has the potential to keep up the industry’s recent selling rate of 16.5-17.5 million cars per year for quite some time. That’s based on simple demographics and the number of licensed drivers in America.
Millennials, generally labeled as those born between 1981 and 1996, belong to an 84 million member club. They now outnumber baby boomers. As millennials matured and started families, they obtained their driver’s license. Now, the number of license drivers is at an all-time high. In 2018, 227.5 million Americans possessed a driver’s license. That’s about 70% of the entire population. Since 2014, the percentage of Americans driving has increased too. And these trends aren’t going to slow down anytime soon:
“The key demographic group of people aged 35-44 years continues to grow until 2034 and could provide growth for the industry for the next decade,” the report said.
That last part about “young people” has some analysts worried. And it might be cause for concern. But that’s exactly the same type of talk we heard ten years ago when everyone thought millennials would shun cars. In all likelihood, Gen Z will probably follow the same trajectory as millennials and start to buy new cars when they really need them.
The biggest impediment to car ownership isn’t lack of interest. It’s debt. The cost of tuition for American students increased 25% over the last ten years. With millennials pretty much out of college, Gen Z is now the latest generation forced to grapple with the extremely high cost of education. The cost of living, at least in terms of rent, is at the highest rate it’s ever been as well. Young people won’t be able to purchase new cars if they can’t afford them.
There’s no question millennials and Gen Z will change the auto industry. They already have. But the bottom line is that car ownership will still exist well into the next decade. And the youths will sustain car culture too. They’re just not going to buy or talk about the classic cars their parents enjoyed.
Biology causes auto purchases and keeps people coming back.
If every kid got a minivan at age 20, the auto market would plummet because of their versatility. As they married and had children, they could keep the minivan. When they get to be geezers with walkers, they can still use the minivan.
Luckily, minivans have the sex appeal of a diaper bag. Singles want something more personal or reflective of their hoped-for future. Guys want fun cars.
Suddenly, biology says it is time to mate! You used that little fun car to land someone who says they will love you forever, and after a few years, biology gives you kids. Goodbye little fun car!
Hello larger little car. Then biology says, “surprise”, here’s some more beautiful kids. Goodbye larger little car – hello diaper bag vehicle.
Then the kids get bigger and you don’t want the minivan anymore, but you need enough room to cart around everyone’s stuff. You buy that four door full size F-150 or Dodge or Chevy.
Then the kids leave home. You get that smaller car, and keep the truck.
Life happens.
The idea that we’d have a generation of people without the need for private transportation is right out of some silly HG Wells novel from 1880. Moving sidewalks, buses, Uber, choo-choo trains, public transportation lose their edge when you don’t live in today’s fecal-covered urban areas. These ideas are what professors tell you in class before they head out of the parking lots in their new personal transportation vehicles.
Welcome young people! Enjoy the freedom of personal transportation, thanks to automobiles!
Hm, I live in an urban area (although I haven’t noticed any fecal matter recently) and got married but we totally forgot to do the kids thing. What a shame.
I did take biology in high school, though. Maybe I forgot something, that was like 25 years ago.
“If every kid got a minivan at age 20, the auto market would plummet…”
But transmission shops would flourish into a new Golden Age!
I do a good bit of demographic analysis for work, and it’s been amazing to see over the past decade or so, just how many misconceptions have been accepted as popular fact regarding the Millennial generation.
The biggest error – and one that continues to be prevalent – is that many articles on Millennials focus exclusively on upper-income people… and extrapolate the preferences of this small sliver of the generation to the full 84 million member cohort. The US Millennial generation is amazingly diverse, in terms of not only ethnicity but also geography and economic status, and yet the majority of articles prognosticating Millennials’ future emphasized only the preferences of just one small group. Think of a 20-some-year-old who graduated from an elite college and now is sharing an apartment with 4 friends and is in the 3rd year of an unpaid internship. That seemed to be the typecast for the typical article about Millennials, but the generation is far more diverse than that. Working-class, middle-class and/or recent-immigrant populations make up a huge proportion of those 84 million US Millennials, yet their product-purchasing and overall lifestyles are largely overlooked by many articles. (Even in this piece, for instance, it’s implied that Millennials “went to college” – whereas less than 40% of US 25-29-year-olds hold a Bachelor’s degree).
There were also errors in many articles assuming that the choices made due to some Millennials’ financial struggles instead implied a preference, rather than a choice made out of necessity. For example, the “sharing economy” – many young adults have taken to sharing things (housing, cars, services, etc.) out of necessity… and it doesn’t necessarily mean that they will always do so. Like what is said here, “once younger adults obtained stable employment and started families, they shopped for cars.” It’s amazing how many earlier analyses missed that possibility entirely.
And then there were errors assuming that the lifestyle and product preferences of Millennials when they were in their 20s would continue indefinitely. For example, that Millennials will always want to live in tiny apartments and not drive. Now that Millennials are largely in their 30s, that’s turning out not to be the case.
In general, Millennials have really gotten dumped on, in an economic sense. The US economy now revolves around low-wage, part-time jobs, and young adults are bearing the burden of this. How this economic situation shakes out in future years (and decades) will determine the eventual trajectory for many future trends, particularly involving Generation Z.
Of course, some things that Millennials have pioneered are likely long-range trends… for example an emphasis on experiences over acquisition, technological preferences, and so on. But many earlier predictions that were made about Millennials were simply based more on a particular author’s viewpoints, rather than on a more objective analysis.
Eric703, I could not agree more with your take on Millennials and it matches very well with what I see going on around me, so I appreciate the generational myth busting (I’ll be 58 in two months-full disclosure) The few I know who are going to college (like my partner’s daughter) are desperately trying to figure out how to not end up with a ton of student debt. She wants a car, but she can’t afford one. If she had her preference, she’d drive an early 50’s James Dean Mercury, but she thinks realistically she would want something more along the lines of a 80’s El Camino but will eventually will actually end up with whatever she can get that is shadetree mechanic fixable. She is in school full time and is also working a part time job.
As far as Millennials wanting cars, my partner’s daughter certainly does especially classic cars. I daily drive a 1979 Dodge St. Regis and three season a 1968 Plymouth Fury VIP and find that the majority of my conversations about either car but more often about the St. Regis are with people between the age of 20-30. Occasionally, I’ll hear from someone who briefly had their grandparent’s 80’s Cutlass or Fifth Avenue but couldn’t afford to keep it going but wish they still had it. I figure they see the St. Regis looking more like something they recall their grandparents driving so that’s why the conversations get started.
If the US economy started paying high wage full time jobs again, Millennials would definitely be buying cars and in larger numbers. But as far as that goes, people in their 50’s who got canned because their jobs got outsourced etc., and can’t find jobs that paid anything like their previous jobs (if anyone will hire them at all), would like to replace their cars. If anything does in the automobile, it will be the low wage economy.
I agree with your analysis. I work with a lot of people in their teens/early 20s. They do things like ride the bus, share an apartment, not because they enjoy doing it but because they can’t afford anything better.
Most of them can’t wait to get a car, even if it is a worn out piece of junk because it still beats riding the bus or waiting on the pricey uber/taxi driver.
Like the generations before them they will move up and make more money. When this happens, their lifestyles will become more “mainstream”. The do have barriers to overcome though, like declining benefits and no or little retirement pensions, expensive healthcare, being young single parents, etc.
I do worry about the low-wage, part time trend for the economy. It is going to destruct, most economy.
are millenials aka as Y gen? Gen Z definitely not interested in cars. or very few of them are.
Yes. “Gen Y” was the old name that was used before the name “Millennials” was coined (because we came after Gen X).
Considering that 44% of wage earners earn $18,000 annually – as per a recent report, I would expect the cheap used sub $5,000 car market to expand for millenials. When your income is $1,500 a month and $600 of that is rent for a room in a house, even the base $14,000 Mirage is an out-of-reach purchase.
It’s when you get a married millennial couple where both are earning that $1,500 that you’ll see new car purchases, but only in the under $20,000 tier. They’ll be paying $1,000 a month for a 1br then.
What they dont buy are the clunky old dungas boomers like, thats why those are going away and the styling has changed with the market, very soon that pristine Camarstang stashed under covers as a retirement investment will be scap value only because those that like them already have one or are dead.
Yeah, until the next blockbuster movie or video game in which the hero drives a Camarstang comes along and they all want THAT car… Ka-ching!
Well considering many of those cars in scrap condition go for nearly $10,000 now a days, I as a millennial will pay scrap value for a pampered 68 Charger 🙂
One other factor that affects millennials is that the kind of stuff that was available for a young Boomer to buy is no longer offered. Most of us age 60 or over remember the little penalty box subcompacts with thin vinyl seats, a 4 speed and seat belts that nobody wore.
Today’s cars are better performers, cleaner for emissions and are safer by an order of magnitude (if not two). All of this is great, but it comes at a cost. The new Maverick or VW you could buy for $2k in 1970 would be about $13k today. A new $13k piece of minimalistic basic transit would probably be popular today. But you can’t get it. We all understand why, and those reasons are good ones. But Millennials who are under pressure with low pay and school loans are left buying from Grandma or from the used car lots.
Well said. It’s always been true. You could once buy a new Ford for $3800 in today’s money: a 1925 Model T (Wikipedia). Much more primitive than that Maverick, not fast enough for 1970 freeways.
US household income went up a lot from 1925 to 1970, which meant the Maverick was as affordable as the Model T in real terms at the time.
1970 to 2020, real median household income only went up from $48K to $54K in today’s dollars (Wikipedia). Which is why a lot more people are driving used cars and auto sales are in trouble.
I’ve long found out that applying inflation calculators to years before the mid-50s or so is increasingly irrelevant, as things have just changed too much. About the only thing that one might be able to use is how many hours the average worker needs to work to buy a new car.
But then so many other factors have changed too. Comparing the time of the Model T to today just doesn’t work for me.
The new car market has actually been extremely healthy. 17 million units for 5 years now, and average sales price is now $35k. Folks are snapping up big trucks and SUVs, and willing to take 7 year loans to do it.
Just seconding JPC’s point and underlining it by the fifty years before that, which enjoyed big prosperity increases no matter how you measure them.
If it’s been 17 million units for each of the last five years that’s not a healthy market, it’s a flat one.
Just looking at the new car market is rather irrelevant. Some 41 million used cars were sold in 2019. So really the total car market is 58 million units. As cars become ever-more durable, used cars become an ever larger percentage of total car sales.
Given that the average age of a car on the road today is over 11 years, then it’s pretty easy to extrapolate that the useful life of a modern car is over 22 years.
As to the new car market being flat, it’s been at a cyclical peak for several years, and is likely to be down a bit this year.
If you’re suggesting it should be growing every year like in the 1960s or so, those days are truly over, for mostly good reasons. Population growth is minute these days, and although income could/should be distributed better, economies can’t just grow rampantly like a cancer.
The era from WW2 to about 1974 was truly a one-time phenomena. Other developing countries have gone through similar periods since then, Europe and Japan a bit later. Then Korea, and more recently China and other Asian countries. But there’s a point where things start to naturally settle down.
There’s a lot more to a good quality of life than just rampant growth.
It’s a good thing cars have become so much more durable (thanks Japan), now that new ones are an ever shrinking percentage of total car sales.
In the article, Edward said, “The biggest impediment to car ownership isn’t lack of interest. It’s debt. …. The cost of living, at least in terms of rent, is at the highest rate it’s ever been as well. Young people won’t be able to purchase new cars if they can’t afford them.” I’m seeing it in Gen-Z people I know, who aren’t driving because they can’t afford it. It worries me and it worries the industry.
There’s nothing natural about flat household incomes because GDP has continued to rise. Incomes are flat because our share of GDP has been steadily shrinking since 1990. The rich get richer…
Imagine the quality of life people could have if incomes had gone up 50% like GDP did. More family time, more vacation time, nicer cars and trucks with less debt. Probably not more units sold by automakers but a much higher average selling price. The Curbside would be an even more interesting place.
A new $13k piece of minimalistic basic transit would probably be popular today. But you can’t get it.
You can buy a brand new Mitsubishi Mirage for $9,950 (see attached screen shots from my 10 seconds long search) It’s objectively a vastly better car than a stripper Maverick or VW. And just how popular is it? I see that one of these is a new 2018.
The reality is that used cars have long taken the the place of cheap entry level cars. Nobody nowadays wants to be seen in a penalty box/minimalist transportation. They’d much rather drive something nicer but used.
The Mirage is the Tata Nano of NA: same issues that sank the Nano in India apply here: cars signal status. Even used ones.
“The reality is that used cars have long taken the the place of cheap entry level cars.”
Over 60 years ago that reality mortally wounded Kaiser (Henry J), Hudson (Jet) and Willys (Aero).
+1000
My coworker bought a brand new Mirage for $12,000 with tax last year, which isn’t a bad deal for anything brand new. But it’s just the dorkiest saddest looking thing that looks like it was designed for a developing country… in 2008. I like small cars and I’m pretty minimalist – I’ve only once spent more than $10k on a car, but I’d vastly prefer a 5-year old midsize sedan or 2 to 3 year old compact sedan if I’m shelling out $12,000, and I’m pretty sure most working/middle class people would, too. It just seems like a like of money for something so lacking in… everything… when there are almost-new options out there for the same price. A 5 year old car with 60,000 miles looks and drives like new these days if the first owner gave it even average care.
But, it has a long warranty, he’s the only owner, and it’s new. So I can’t really judge him, it’s just not something I would do.
Even I, at my cheapest, did not shop a Mirage. Ever.
Now that they are the cheapest car sold here since Nissan decided to take their redesigned Versa upmarket to swim with the Fit, Yaris iA and Mazda 2, it may well see a sales uptick. And since Nissan owns or has a huge share of Mitsubishi, they planned it that way, surely.
Your Millennials in stock photos remind me of this.