Millennials are buying economy cars, pickup trucks, Experian says
For the last few years, a big question in the auto industry has been: “How do we market to Millennials?”
It’s a very valid question considering there are nearly 80 million people grouped under this generational category who will be in the market for a car for years to come. Automakers’ success will be predicated on how well they market to this significant portion of the population.
The prevailing wisdom is that young people simply don’t care about cars anymore. Certainly, they care less about driving than the same age group a generation before. According to a recent study by the University of Michigan, Transportation Research Institute, in 1983 95.6 percent of 25 to 29 year olds had a driver’s license. By 2008, that percentage had dropped to 86.3 percent.
While that is a significant drop, the glass is far more than half full. There are still millions of licensed drivers out there under the age of 30. And, licensed drivers are going to want or need a car at some point.
Unfortunately for manufacturers, nearly two-thirds of Millennials opted for a used vehicle. According to a recent analysis, people ages 25 to 29 bought a used vehicle 64.7 percent of the time, while only buying a new vehicle 35.3 percent of the time.
This is most likely a function of simple economics. Millennials have yet to hit their peak earning years, so they are opting for lower-cost used vehicles. In fact, the average used vehicle price paid by Millennials was $14,972, compared to $16,742 for Generation X, $16,759 for Baby Boomers and $16,612 for the Silent Generation.
When Millennials do purchase new vehicles, their top choice is the Honda Civic. And, of the top 10 most frequently purchased vehicle classes, Millennials were tops in just two: small-car economy and midrange car-lower. Given that the auto industry has traditionally made higher profits on pickup trucks and sport utility vehicles, Millennials’ preference for smaller, lower-cost vehicles could be a dangerous sign for manufacturers.
However, there is some light at the end of the tunnel. For Millennials, the second most popular vehicle is the Ford F-150 and the fifth most popular vehicle is the Chevy Silverado 1500. So, this group is showing some diversity in its vehicle selection. As this group continues to age, it will likely grow its earning and spending power. This could translate into a shift to more new vehicles and to somewhat more expensive vehicles.
However, it will be important for manufacturers to continue learning how to make small cars more profitable and identify within this cohort which customers are inclined to buy the more profitable pickup trucks. If manufacturers can succeed on these two fronts, they will likely succeed with Millennials.
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