Previously we’ve talked about the Millennial generation as workers and how that affects auto repair. They will also have an impact on the auto industry as consumers. This week The Truth about Cars website posted an article about Baby Boomer parents buying cars for their adult children because Millennials could not afford them. Here we will discuss why Millennials cannot afford cars and how they view cars in ways that differ from the way their parents’ generation did.
Millennial Debt Affects Purchasing Power
Compared to previous generations, Millennials have less money. They have had to contend with high levels of student loan debt, an increased cost of living, and low wages. A recent Bank of America survey found that most Millennials under age 24 had less than $1,000 in savings. Nearly half of them had no savings at all. Older Millennials are in a similar boat. Federal Reserve data has revealed that Millennials earn 20% less than their parents did at the same stage of life. Unfortunately, education, housing, and medical care have skyrocketed while wages stagnated.
Debt is dragging down their purchasing power the most. Older Millennials between the ages of 25 and 34 carry an average of $42,000 in debt, a combination of student-loan and credit-card debt. According to a survey by Bankrate.com, more than a quarter of Millennials have delayed purchasing a car because of their debt. Midwestern Millennials were most likely to cite debt as a reason for not buying a car.
It’s also true that average monthly payments for either loans or leases have gone up in the past five years. “[Millennials] are far more likely to tell us that owning a vehicle has just become too expensive,” said Isabelle Helms, vice president of research and market intelligence at Cox Automotive. “We know their financial situations. We know they are plagued with debt.”
Boomer parents who are buying their adult children cars are temporarily papering over the problem of cratered net worth. They won’t be able to do so forever, however.
Millennials Are More Reluctant to Commit to Large Purchases
Because they came of age during the Great Recession, Millennials do not have the same faith in their financial futures. Many of them graduated from college and could not find jobs that paid well and wound up working in jobs they could have found without advanced degrees. They are struggling today and don’t know what to expect tomorrow, so they’re less likely to commit to large ticket items like cars and houses.
They also want to pay as little as possible for things they don’t think benefit them since they are on very tight budgets. When confronted by the price of car maintenance many of them get sticker shock. They’re much more likely than Boomers to opt for using public transportation where it’s an option – or to use ride-sharing services like Uber as a way of only paying immediately costs instead of spread-out costs like loans, maintenance, and car insurance.
Baby Boomers have tended to look at cars as a vehicle for freedom and an expression of themselves, but they grew up during a time when car ownership was more affordable and they could do some of the car maintenance themselves. Cars today are far more complex and computerized. They’re so expensive that many Millennials view them as a luxury and not a necessity, let alone something that defines them.
What does this mean for the auto industry? It’s likely that the auto repair market will contract somewhat as Boomers are replaced by generations that do not have as many resources. It also means auto shops will be dealing with customers who are less likely to accept that expensive repairs must be done and need to be convinced of the value of routine maintenance. If it’s not urgent, Millennials are less likely to want to pay for it.
Does your auto shop have experience marketing auto repair to Millennials? We would be interested in hearing about your experience with Millennials as customers. Please leave your comments either here or in our forums.