In January 2015 I wrote an article that starts, Today’s young Americans otherwise known as millennials are less dependent on cars than past generations.
For auto manufacturers and financial institutions alike, there was concern that maybe millennials would never buy cars. Instead, they would continue to use ride-sharing services such as Uber and Lyft or public transportation.
But that concern may have been misplaced, at least to a degree. (The fact I’m working at home because of the D.C. Metro shutdown today notwithstanding.)
According to J.D. Power’s Power Information Network, millennials defined as those between 21 and 38 years old in 2015 bought 4 million cars and trucks in the U.S. in 2015. That total was second only to baby boomers. In addition, the millennial share of the new car market increased from 17% in 2010 to 28% in 2015. And, in the country’s largest car market, California, millennials’ share of the new car market beat boomers for the first time.
For years, however, the story was different. A 2011 study by the University of Michigan showed a trend in the number of young people getting driver’s licenses. In 1983, 87% of 19-year-olds had a license, but by 2010, that number had fallen to 69%. Many took this as a sign of changing preference. However, it may have been more a reflection of the economic climate of the late aughts and early 2010s than anything else.
During the Great Recession, both money and job prospects were tight for millennials and teenagers. In 2010, the millennial unemployment rate was 13%, about 4% higher than the national average, according to an October 2014 report by the White House Council of Economic Advisers. The unemployment rate for teens rose from 15% to 26% from 2006 to 2012.
Now that those rates have dropped the millennial unemployment rate now sits around 8% and both interest rates and gas prices are lower than in years previous, car buying has become more affordable and attractive to millennials.
Of course, there are still some obstacles to millennial auto sales: for one, the Class of 2015 graduated this past May as the most indebted class ever. For now. According to the Wall Street Journal, student-loan debt for these graduates averages just more than $35,000.
Millennials also make less money than generations that have been in the workforce longer, according to government data. The median household income for people ages 25-34 is approximately $54,200. For those ages 55-64, it’s more than $60,000. As the millennial generation matures and moves up in the workforce, there’s reason to believe their spending power will increase accordingly.
For credit unions, this data shows that what many had feared to be true that millennials would severely alter the auto buying process instead represents a kind of new normal. With the burden of student loan debt and the proliferation of other means of transport, millennials eschewed buying cars for longer than they had in years previous.
But now that the economy is better and millennials are more likely to have jobs and financial leeway, they are once again buying cars. So maybe they started buying a little later than previous generations, but we should have expected nothing less of millennials.