Millennials are rumored to be adversely opposed to buying cars, which could be a threat to the automotive industry. However, this group is buying cars, just non-traditionally.
As they have come of age as consumers, the Millennial generation has had their every move examined and critiqued, sometimes to exhausting lengths. Known for bucking major consumer trends such as homeownership, engagement rings, and so on, perhaps the most notable categorization that Millennials have been marked with is that they don’t buy cars.
Millennials have proven to show less interest in making large capital purchases, such as a car, than the Gen X and Baby Boomer generations before them. They instead prioritize paying off their existing debt and spending any discretionary funds on leisure experiences. Plus, having access to alternative means of transportation through ride-sharing apps combined with their interest in ecological conservation make for a group of the general population that is, determinedly it would seem, less likely to purchase a car.
But as it turns out, Millennials are not buying cars at a lesser rate than previous generations; they are just waiting longer to buy and exhibiting different purchasing habits than previously observed.
A New Way of Shopping
A major distinguisher between the way Millennials shop for cars and the way their predecessors have done so is through online shopping. Millennial shoppers are predominantly “webroomers”, meaning that when they are looking to purchase a new item, they do their product research online first before then purchasing in-store. How does this translate to auto sales? As opposed to previous generations who will visit 3-5+ car lots before making a purchase decision, Millennials are visiting less than three car lots, and often only one, because they have already researched vehicles online, determined what they want, and have come to the respective dealership to look at the particular car they are interested in.
Social Media is another powerful tool of the Millennial consumer. In addition to being able to find vehicle inventory information from local dealerships, they can read customer reviews on vehicles or dealerships and tap into their social community to get input on what make and model to choose.
Millennials are proving to be savvier shoppers than their predecessors, using every resource at their advantage making the buying process work for them.
Stages of Life
As of now, in 2019, most Millennials are unmarried and do not have any dependents. They’re predominantly living in urban and metropolitan areas with access to improved public transportation, are working remotely from home at an increasing rate, and benefit from the ease of ridesharing apps. Millennials just don’t necessarily need their own ride at this point in their lives.
Additionally, the average Millennial is still paying off student loan debt of $33,000 on a median annual earnings valued at $56,000. They experience higher student loan debt totals than previous generations with less or equal to annual earnings. Thus, Millennials’ big-ticket spending has been curtailed and they must focus on paying off their debts. So, they are either waiting longer to save up for a large, new model vehicle or are searching for used or smaller, less expensive ride with better gas mileage.
However, Millennials like every generation before them will age, settle down, earn increases in salary, get married, have kids, and move to the suburbs. When this happens, the necessity of vehicle ownership will be there, leading them to purchase larger, more advanced vehicles to suit their wants and needs. According to a 2019 study, only three-quarters of millennials around the world own a car right now, but of those 75%, 83% are expecting to invest in another car in the next five years.
Millennials may seem like they are buying cars at a lesser rate, potentially threatening the future of the auto industry. But in reality, they’re just taking longer to mature as consumers and finding new ways to do their shopping.