During the depths of the Great Recession, carmakers wondered aloud if young Americans, the millennials, would be the generation that breaks the nation’s long love affair with cars.
A 2012 article in The Atlantic magazine entitled “The Cheapest Generation” pointed out that from 1998 to 2008, the proportion of teenagers with a driver’s license fell 28 percent, they were driving fewer miles, and carmakers were searching for a way to connect with a generation that seemed more concerned with having the latest smartphone that having the flashiest car. “I don’t think car-buying for millennials will ever be what it was for boomers,” Sheryl Connelly, head of global consumer trends at Ford, told the magazine.
General Motors even enlisted the business-consulting firm MTV Scratch, a corporate relative of the TV network responsible for creating the Jersey Shore reality TV show, to help it connect with 20-somethings. For car wash operators, the implication was clear: A generation of customers could be lost, potentially imperiling the industry itself.
Not so fast. As it turns out, millennials aren’t disinterested when it comes to cars; they were just broke. They had no money to buy cars and no jobs to drive them to. And college graduates who did find work often had to settle for low-level jobs that previously hadn’t required a college degree, all while dealing with record-high levels of student debt that crippled their purchasing power. For millions of Americans in their 20s and 30s stuck living with their parents, a nice new car seemed out of reach.
But now things have changed. Buoyed by a stronger job market, millennials are jumping back into car ownership with both feet. Michelle Krebs, senior analyst at Autotrader.com, citing statistics from the global market research firm J.D. Power & Associates, said that in 2014, millennials accounted for 27 percent of new-car sales in the U.S., up from just 18 percent in 2010. J.D. Power defined millennials as those born between 1982 and 1996.
“We have heard the myth that millennials are not into cars for so long, but we think it’s largely driven by economics,” Krebs said. “The millennial generation was hurt the most during the Great Recession in terms of jobs and income, and they are loaded with staggering student debt, so they are getting into the car market later, but they are indeed getting into the car market.”
Krebs said that by 2018, the millennial generation is likely to overtake baby boomers as the leading car buyers. While especially budget-conscious young Americans are opting for used cars — as they always have, Krebs said — more and more are looking to buy new cars. And for young Americans, buying a new car is being made easier by lower gas prices and the increasing popularity of longer-term car loans — lasting six years or more — that keep the monthly car payment low and reflect the fact that cars are lasting longer these days.
Krebs said the average car on the road is 11 years old, since many Americans of all ages put off buying a new car during the recession. But now, with newfound confidence in their economic prospects, more young Americans are taking the plunge.
“Millennials who are graduating from college this year are entering the best job market in a decade,” Krebs said. “We’ve seen six consecutive years of job growth, and that’s helping them. We also see a definite split between older millennials and the younger ones. The older ones are finally forming households and making more money. They’re starting to buy cars.”
Steven Szakaly, chief economist for the National Automobile Dealers Association, agreed.
“I think millennials have proven to be and are going to be car buyers,” he said. “Part of the issue is that they are graduating with debt, and it takes a while to pay it off. And they’re starting families later in life. One of the biggest indicators for a new-car purchase is whether someone has a child or not. They certainly are interested in car buying, but they’re delaying it because they are delaying major life milestones such as getting married and having children.”
Millennials also want to drive just as much as previous generations. According to MTV’s 2015 study “Millennials Have Drive,” which was discussed at length at NADA’s 2015 convention, state laws are holding teens back from getting driver’s licenses. Since 1990, all 50 states and the District of Columbia have implemented some form of license-restriction laws, including waiting periods to receive a license, limited driving hours, required car decals and a limited number of
car passengers.
Some of the study’s other key findings:
• 76 percent of young people would rather give up social media for a day than their car for a day.
• 72 percent would rather give up texting for a week than their car for a week.
• Eight in 10 millennials see cars as the one big-ticket item people their age purchase.
• One in three young people plan to buy or lease a new car within the next six months.
Krebs said that although millennials tend to be more environmentally conscious than their parents, that attitude isn’t reflected in their car purchases. Millennials accounted for about 30 percent of all SUVs sold in the U.S. last year, she said, though smaller and cheaper SUV models such as the Honda CR-V, Toyota RAV4 and Ford Edge were among the top sellers.
“Basically, the millennials are getting into the car market and are no different than the rest of the car market,” Krebs said. “They’re very mainstream about their purchases. They also aspire to luxury and like luxury brands, which is why companies like BMW, Mercedes and Audi have been coming out with entry-level models. Audi is a really popular aspirational brand for millennials. And they want a lot of technology in their cars, such as Bluetooth connectivity, and more opportunities for customization.”
“I think they buy everything, like everybody else,” Szakaly said. “They’re more environmentally aware, but I haven’t seen any data that supports the idea that just because they’re more environmentally aware, their buying trends are radically different.”
For car wash operators, this is encouraging news. After all, if millennials’ attitudes about car buying are largely the same as older Americans, then their attitudes about car ownership, such as the importance of keeping their new purchases clean, are likely to be the same too, Krebs said.
Car wash operators who wonder why more millennials aren’t showing up at their locations shouldn’t jump to the conclusion that car-sharing companies are eating into their business. Zipcar, which claims to be the world’s leading car-sharing network, has only about 900,000 members and about 10,000 vehicles worldwide, according to Lindsay Wester, the company’s public relations manager.
Zipcar operates almost exclusively in urban areas and college campuses. It’s in 470 cities and towns around the globe and on more than 400 college campuses. Wester said the typical Zipcar member lives in a densely populated city where owning a car is undesirable due to traffic congestion, higher insurance premiums, and the high cost and lack of availability of parking.
Car-sharing companies are hurting car wash operators slightly because those cars typically don’t visit car wash locations. Rather, companies like Zipcar mostly hire vendors to come out and wash cars on location, Wester said.
But if car wash operators believe that car-sharing programs are sweeping the country and capturing a large chunk of the millennial demographic, they should think again.
“I think most people think of Zipcar as a millennial brand, but in actuality, our average member is 36, which is not in the millennial demographic,” Wester said. “Whether they are 18 or 80 years old, if they live in a city, take public transit regularly, use bike-sharing and are open to alternative forms of mobility, then they really are our target demographic. It’s really not about age, it’s about lifestyle.”
“We’re on track for record new-car sales and record used-car sales, so we aren’t seeing an impact from car-sharing programs,” said Autotrader’s Krebs. “I think what many people will be looking at in the future is will car-sharing have an impact on a millennial household buying a second vehicle? That is a question we can’t answer, but it’s one we’re paying attention to.”