TRAVERSE CITY, MI – Despite some evidence younger consumers are losing interest in buying cars, it’s more an issue of affordability,’ chief economist points out in a Management Briefing Seminars presentation here.
“There may be something to it, but I seriously doubt” the younger crowd is less enthusiastic about buying a new set of wheels, Mustafa Mohatarem tells attendees.
Most experts cite time spent on social media, smartphones and other devices by younger consumers as making car ownership less alluring, because face-to-face communication no longer is necessary to keep in close touch.
Several key metrics do not bode well for luring younger car buyers to dealer showrooms. Only 68% of Americans aged 16 to 24 are licensed drivers, which Mohatarem describes as a “dramatic decline.” That number jumps to 88% in the 25-34 bracket, 91% in the 35-44 group and 92% for those over 55.
Younger prospects face other barriers, such as higher unemployment, lower income, stiffer insurance rates and the fact new cars and trucks cost more as content and regulations add to sticker prices, he says.
The average new car can cost $27,000-plus these days. However, Mohatarem notes the Chevrolet Spark can be purchased for less than $15,000 and the Sonic for between $15,000 and $18,000.
Clearly, young buyers face onerous insurance costs, he says. “They pay dearly: $2,923 annually, or 15.5% of their income, compared with $1,201, or 3%, for those over 65.”
The biggest obstacle in capturing young consumers is their steep unemployment rate. The national average was 7.4% in July. The latest tally for 16- to 19-year-olds stands at more than three times that number: 24.5%, scaling down to 13.2% for the 20-24 group and a low of 5.3% for those over 55.
Another roadblock for potential young buyers is that many carry serious student-loan debt. But as these are paid down, they will become prospects for new cars.
Looking at the overall market, Mohatarem says continuing low interest rates and inflation bode well for the auto industry’s outlook. He cites relatively high consumer confidence, easing unemployment, rising income and availability of credit as pluses.
Even though the light-vehicle seasonally adjusted annual rate was a strong 15.9 million units in June, Mohatarem says pent-up demand from the 2008-2010 U.S. recession remains a factor in measuring buyer interest.