Published on January 22nd, 2014 | by Christopher DeMorro8
By The Time Millennials Afford Cars, It Might Be Too Late
Deloitte LLP released a study on my nearly-80-million-strong generation stating that us Millennials have a very specific idea of what we want in a car. Automakers are doing a good job of delivering those products. Bluetooth connectivity, integrated touchscreens and voice commands, and the ability to stay connected with our peers have been built into nearly every vehicle in every major car lineup in the U.S. We love the cars automakers are building, but old people are the ones buying them.
The problem is that most of us simply can’t afford these cars, not that we’re disinterested in them. We’re being paid stagnant wages, most of which go towards paying off high levels of college debt. I have both college debt and a new car, and my monthly school payments are $100 more than my car payments, at almost twice the interest rate. The only way I can afford this is that my fiance and I share this singular car, a 2012 Chevy Sonic, something many other families are also doing. I am among the many Millennials learning to live with limited or no access to automobiles.
The reason I’m able to do this is that I’m part of a generation moving back to major urban areas en masse, with high rents and even higher car ownership costs. In a city like New York, where the average monthly rent for a two-bedroom apartment is more than $3,000, car ownership is an unnecessary luxury in a place where public transit options or your feet can get you nearly anyplace you need to go. Even smaller cities offer a larger range of job opportunities that don’t require car ownership, and for those rare times you do need a car, driving services like Uber and vehicle-sharing services like ZipCar put a fully-registered and insured car at your beck-and-call. High gas prices may have driven commuters to public transit, but other factors are keeping them there.
Don’t take my word for it though; check out this Polk graph comparing the average age of new car buyers in 2011 with the age of buyers in 2007.
That data too old for you? Well the University of Michigan released a new study this summer saying the same thing; older buyers are replacing the young ones at the new car dealership.
In short, my generation is learning to live either with older vehicles, or no cars at all, and the number of car ownership alternatives are greater than ever. The problem only gets worse from here.
Eventually, my generation will have to take on the jobs vacated by either retiring or dying Baby Boomers, though this is no promise of improved wages. But even if better pay does come with better jobs, automakers are currently producing what are arguably the best cars ever produced, which will in a few years time make their way onto the used car market. So then an entire generation that grew up buying old beaters will have an abundance of newer, better used cars to buy. So why take on a new car payment when you can get just as much car for less than half the price? This is a problem that won’t manifest itself until Baby Boomers stop buying cars intended for Millennials.
That doesn’t mean the new car market is going to shrivel up and die, but I think it’s going to downshift in a big way. 15 million vehicles a year in a country where most new jobs are barely paying minimum wage is unsustainable, and has been lead largely by subprime loans, high lease rates, and increased spending by Baby Boomers. My massive generation is barely a blip on the new car buying radar, and even people aged 75 years and older are buying cars are a higher rate than Gen Y. The share new car buyers under 34 has dropped off 30% in just five years.
It’s not just new car buying that’s declining either; since 2009 the number of miles driven by those ages 16 to 34 has dropped some 23%. We’re talking about tens of millions of people who no longer make up a part of the new car buying public, some of whom are bound to decide life without a car is infinitely simpler. With the chorus of public transit advocates only growing louder, this decade could very well be the last big hurrah for American auto sales.
After all, it’s crazy-expensive to own a car, not just buy one. Taxes, insurance, maintenance, parking, and of course gasoline are all up to thousands of dollars of recurring costs every year. By some estimations, it costs over $9,000 per year to own a car for the first five years, and even an economy car like the Honda Fit will take, on average, $5,800 a year out of your paycheck. I could go on one hell of a vacation for that kind of money, or buy a bitchin’ electric bike, which might cost me $200 or so a year in upkeep costs.
Sure, we all want what is shiny and new, but Millennials are being forced to pick what is really important in ourlives, and more often than not cars are at the bottom of that list. While I hate to bring up the specter of smartphones again, it’s become a necessity in the lives of most 20-somethings, this diligent young writer included. While I have made my distaste for GPS devices loudly known for all who’ll listen, Google Maps on my smartphone has saved me from an embarrassing admission or phone call more than once. In a few years, the used car market will be full of cars that can do all of that; just how much more connected can cars get? How much more connectivity do we need?
I don’t think the car culture is dying, because there are still millions of affordable used cars out there, and people still get excited by things with four wheels. I’m a certifiable car nut with a 1969 Mercury Cougar in a barn, slowly but surely being restored. But I do think America’s auto-centric culture is due for some major downsizing on a European scale, with more people going carless as more options become available. Eventually, car ownership could become the exception, rather than the rule in many areas, and as a car enthusiast, I see this as both a good and bad thing…but that’s for another article.
I’ll tell you right now, if suddenly found myself unable to make either car payments or smartphone payments, I’d give up the car without a second thought. Impulsively buying a $300 tablet is a lot more palatable to my budget than a $20,000 sedan, and these days the cost of owning a smartphone is right up there with car payments.
I can’t imagine life without my smartphone, but I can imagine life without a car…and it isn’t all that bad.
Top Image: Chris JL