Why Millennials Aren’t Buying Cars

by Jessica Sommerfield · 6 comments

Auto sales statistics in the last several years have revealed an alarming trend: millenials, the youngest adult generation, aren’t buying. Only 12% of the auto sales in 2012 were attributed to them.

Since automotive companies’ strategies have always been to appeal to young drivers, securing their loyalty to a particular brand at a young age, this creates a challenge. Some vehicles introduced in recent years, such as Honda’s Element, were designed to appeal specifically to young drivers. To Honda’s surprise, it wasn’t millennials lining up to sign on the dotted line — but, rather, baby boomers.

Instead of continuing to waste money on marketing assumptions, the auto industry would do well to determine the root cause of the decline in millennial vehicle purchases.

Here are a few key reasons why millenials aren’t buying cars. 

Their Finances

One of the most obvious reasons why millennials aren’t purchasing vehicles is that they can’t afford them. Most millennials have very little savings, massive charge card and student loan debt, poor credit, and poorly-paying jobs.

This isn’t to say that a portion of them won’t eventually buy when things look up; they’re just not in the financial place to purchase now. This actually demonstrates surprising responsibility on their part; they’ve learned from the mistakes of generation X that if you can’t afford it, don’t buy it. Although auto dealers can create more favorable loan conditions to lure millennials, money isn’t the only reason they’re not biting.

Their Lifestyles

An increasing number of millennials are moving into cities and areas where public transportation, biking, and walking are the preferred modes of transportation. City life isn’t conducive to vehicle ownership, because of poor gas mileage and the hassle and cost of parking and storage (not to mention the potential for theft). It’s simply cheaper and more efficient to use other forms of transportation.

Millennials aren’t traveling as much as they used to, either. Thanks to the wonders of the Internet, more millennials are able to work from home (or anywhere they can take their laptop). They’ve also become accustomed to the convenience of online shopping for everything from books to music to groceries.

Their Priorities

Many millennials aren’t even bothering to get drivers’ licenses, since they don’t expect to be driving. In the past, having a driver’s license wasn’t just a necessity — but a rite of passage for most teens. Now, it’s something they don’t have the time or interest in pursuing. This could be a bad sign for the auto industry: financial hurdles can be overcome, but the loss of a generation’s interest in their product is a tremendous obstacle.

Besides creating vehicles that are more compact, hip, and gadgety, the auto industry is starting to hit on one of the best marketing conduits: social media. Millennials respond more to advertising through social media than any other channel; if they’re going to buy a car at all, Twitter, Facebook, and similar sites will definitely influence their choices.

What It Means

The decline in automobile purchases by the younger generation has many worried for the state of the industry and for the economy — since millennials are also delaying home ownership and other large purchases.

Some think this spells serious trouble for the industry’s future, while others who study millennial habits insist it’s simply a phase.

Millennials are just taking a little longer to “grow up,” and are waiting longer to get married, have families, and purchase homes and vehicles. And by focusing more on their career, finances, and life path, millennials just might end up with more purchasing power later on in life.

What do you think? Is this just a phase, or is it an indication of the auto industry’s decline?

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{ read the comments below or add one }

  • Arun Sen says:

    I’m 26 and have never owned a car, although I do have a license. When I lived in China for two years, I loved the efficient, cheap public transport system, available even in smaller cities. There was no need for a car. Although US public transport is not always as convenient in smaller cities (i.e. busses few and far between) I will avoid buying a car as long as possible!

  • Ruth Cooke says:

    I’m the parent of a couple of millenials, and the article is bang on, as far as they’re concerned. My son owns a car–he bought the cheapest used vehicle he could find, because he goes to school and works in a different city. Now that we have the GO train, though, he tends to leave the car at home on school days. My daughter only recently got her driver’s license (she’s 25), and does not own a car. She borrows mine or her dad’s. Most of the rest of their friends don’t have a driver license at all, and do not seem to be fixated on getting one.

    I do think that the car industry is going to have to adjust to new realities. North American habits are changing–the price of gas, the deterioration of the environment, and falling wages relative to inflation are all working against them, and with more and more of us living in cities with decent public transportation, consumer habits have changed a great deal. It’s time for them to face reality, I’m thinking.

  • Mike says:

    Unless you have a reliable source, I don’t think it’s fair to say “Most millennials have very little savings, massive charge card and student loan debt, poor credit, and poorly-paying jobs.” Sure you hear a lot of stories like this but I would venture to guess that a good amount of millennials of not more than 50% are actually responsible and not saddled with credit card debt and poor credit ratings.

  • lana says:

    I would love to not have to deal with cars! We have four that we are maintaining, gassing up, insuring, cleaning. Ugh! We need them where we are, unfortunately.

  • Grant says:

    I agree. I live in Boston. My office is two train stops from my apartment. You can walk everywhere. Not to mention a parking space can cost hundreds of dollars per month. It just doesn’t make sense. Besides, there’s always Zipcar if you need it.

  • elcee8 says:

    I would totally buy a car if I could afford one. I currently have over $80,000 in school loans. Granted, I have the means to pay off that amount in a couple of years while living like a poor student. But I am more interested in a Tesla (maybe when they come out with a cheaper version), since it is more environmentally friendly than a typical car. But that means I wouldn’t be buying a car for at least a few years.

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