Don’t look now: Millennials are fast becoming a major automotive buying segment!
Not too long ago, there was ample opportunity to express quite a bit of doom and gloom over how Millennial lifestyles and buying habits would negatively impact the auto industry – and plenty of evidence to support those feelings. With mounting student loan debts, an increased interest in urban living and its easy access to public transit, and the meteoric rise of carsharing, there were doubts many Millennials would ever want to own a personal vehicle.
However, it seems like times may be changing.
Late Blooming Buyers
Now making up the fastest growing segment of vehicle buyers, Millennial drivers are expected to represent 40% of the U.S. new vehicle market by 2020.
Why the sudden change? Well, it wasn’t sudden; it was gradual—thanks to delays courtesy of last decade’s economic crisis. Job scarcity and increased insurance costs prompted Millennials to play things a little closer to the chest until things turned around. Now that they have, this generation is taking a closer look at personal transportation and influencing vehicle trends.
Less is More
Whether it’s the option of new or used, lease or buy, big or small, for the most part Millennials are abiding by the adage that ‘less is more’—at least when possible.
Not only did it hold back Millennial buyers, but the recession had another effect on automotive purchasing: it increased the demand for and affected the availability of used vehicles. Traditionally a cost-conscious alternative to new vehicles, used cars have been in shorter supply in recent years. But as more pre-owned options enter the market, many Millennials are taking advantage.
That said, they’re still more likely to lease than buy. As the largest group of lessees with a household income below $50,000, Millennials are finding the short-term commitment of a lease more attractive than locking themselves in to one vehicle for an extended period.
And finally, in keeping with the ‘less is more’ position, Millennial buyers are often just fine with the convenience of compacts. Though some opt for popular SUVs and crossovers, many Millennials—with lower incomes and smaller credit profiles—are maintaining a more measured approach to personal vehicles.
No matter what they’re buying (or leasing), the recent surge and growing power of Millennial buyers looks like it’s going to provide a big boost to the automotive industry.