One of the most overblown auto industry narratives is that young people — those in Generation Y, also known as Millennials — have little urge to buy vehicles.
Though the numbers show a decline in the percentage of new car sales from young drivers, those figures are a result of circumstance more than a shift in desire. It's not all about smartphones, the "Xbox generation" or an urban city revival.
It's about the money. Specifically, the money Millennials don't have.
Consider the following:
- Many in Generation Y began their driving years during the worst recession since the Great Depression. Many parents of those young folks were laid off at one time or another. Others watched their paychecks shrink, leaving less disposable income to buy Johnny or Sally their first vehicle.
- The teen unemployment rate in recent years has reached record highs, so Johnny and Sally can't even properly contribute financially toward their first car.
- In 2009 there was "Cash for Clunkers," which took approximately 750,000 used cars off the road and artificially spiked the asking price for the remaining used car vehicle fleet. Used car prices are still historically high and those prices are coming down at a snail's pace.
- The average price for new vehicles continues to escalate, and now sits at approximately $31,000.
- There are still ways to purchase an affordable car, but for many in Generation Y, very few cars are affordable when you're saddled with record high student loan debt. (Or worse, anticipated student loan debt.)
- Don't forget about the credit crisis, which has since eased, but some Millennials still find it difficult to get approved for loans, particularly those with modest interest rates on historically high-priced cars.
I know all of this because I've lived through all of this. And automotive executives know this too, which is why most aren't losing sleep over this manufactured crisis.
The unemployment rate in the U.S. is now dropping, gross domestic product is growing, young folks are getting jobs and soon will have $200 billion in annual spending power. They'll grow up, move out of their parents' basement and many will have children, and in turn will need an automobile to shuffle their kids between soccer practice and band camp.
As one auto sales analyst put it: "I can't bet against procreation."
Young folks will buy cars; just give it time.
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