Cars
Generation Y Giving Cars a Pass
The generation gap is a growing, long-term headache for automakers.
By Jim Ostroff, Associate Editor, The Kiplinger Letter
September 14, 2010
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Selling cars to young adults under 30 is proving to be a real challenge for automakers. Unlike their elders, Generation Yers own fewer cars and don’t drive much. They’re likely to see autos as a source of pollution, not as a sex or status symbol.
Motorists aged 21 to 30 now account for 14% of miles driven, down from 21% in 1995.
They’re more apt to ride mass transit to work and use car sharing services -- pioneered by Zipcar -- for longer trips. And car sharing choices are expanding, with car rental firms moving into the market, making it convenient for young folks to rent with hourly rates and easy insurance. Connect by Hertz, for example, is rolling out its car sharing services in the New York metropolitan area, with plans to eventually expand them to around 40 college campuses nationwide.
The trend won’t cause car sales to tank, of course, but the generational shift doesn’t bode well for manufacturers and auto dealers, which for decades have counted on wooing young new drivers to their brands in hopes of cementing lifetime customer relationships.
Gen Yers are a big potential market: At 80 million strong, they represent the biggest generation in U.S. history. Baby boomers are a close second, but millions of them begin turning 65 next year -- an age at which car purchases drop off sharply.
“It’s a matter of mind-set far more than affordability,” says William Draves, president of Learning Resources Network, an association that studies consumer trends and provides education and training services.
“This generation focuses its buying on computers, BlackBerrys, music and software and views commuting a few hours by car a huge productivity waste when they can work using PDAs while taking the bus and train,” says Draves.
Moreover, in survey after survey, Gen Yers say that they believe cars are damaging to the environment. Even hybrid electric vehicles don’t seem to be changing young consumers’ attitudes much.
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Reader Comments (12)
Posted by: Nomen at 09/15/2010 05:43:08 PM
This article seems to ignore the fact that the "under 30" crowd simply doesn't make as much income as the older generation did. A high school grad can no longer go out and get a good paying manufacturing job like they could 30 years ago. Even recent college grads are finding a tough job market and outside of health care, the wage scale has been stagnant for quite some time while college debt continues to rise. As the prices of new cars continues to soar while incomes fall, it comes as no surprise that the younger generation isn't buying. With the additional bloated cost of a hybrid, of course they aren't even interested. As far the statement "It's a matter of mind-set far more than affordability,..." I DON'T THINK SO!!!!!!!!!!!!!!
Posted by: Lock Piatt at 09/15/2010 06:03:04 PM
Get a clue auto companies - just like in Europe and Asia the young do not make enough money to afford a new car and eat. Your products cost too much.
Posted by: JGN1986 at 09/20/2010 05:52:51 PM
As a member of Gen Y, I can say that there is definitely a resistance towards buying new cars. Many Gen Yers have grown up relatively spoiled when compared to Baby Boomer and Gen X counterparts...the difference with us however is that when it's time for us to make our own money...our innate frugality rises to the surface. Cars depreciate in value the second you drive them off the lot. A car is not an investment..it is a relative luxury for those in big cities (and a necessity for those in places with no mass transit). Unless you are making big bucks and can spring for a fancy ride...the best thing to do is buy a cheap new/used car. The point of a car is to get yourself from point A to point B.
Posted by: Joster at 09/20/2010 07:23:42 PM
I'm in my late 20's and I wonder how much of this is true in places other than big cities. Where I live, there is no bus or commuter train to get me to work. I have to drive 20 miles, no big deal but I'm not going to put that kind of damage on a new car either.
Posted by: Libby at 09/20/2010 09:33:16 PM
Do your research! The Gen Y has been called The Millenials for awhile now. Maybe you and auto makers should hire generation experts since you both seem clueless.
Posted by: Chupa$ at 09/21/2010 01:59:06 AM
Maybe its the ugly ... designs that everyone is trying to mimic.. show me a car that doesn't look like a gamecube and sport 90% plastic and then we'll talk...
Posted by: Rachel at 09/21/2010 12:09:20 PM
I'd like to echo what the previous commenters have said--people in this age bracket are having a harder time finding decent jobs, so with no job to drive to, no savings or credit line with which to purchase a car, etc., of course we're going to be driving less. That said, I'd love to see more decent public transit in more cities across the U.S., but until the stagnant economic outlook changes, young people simply aren't going to be making big purchases like previous generations.
Posted by: Joy Division at 09/21/2010 01:19:11 PM
Generation Y. Please get it right, it spans eighteen years, not ten. You really mixed up generations. Generation Y'ers are between 16 and 34 years old right now. The baby boomers are a larger generation if you include the 1946-1964 theory. Divided the baby boomer years by two and the generation Y comes out to be a larger generation. My entire life I have been generation Y and people of Generation Jones and X are seriously pessimistic about the fact that I am generation Y in my early thirties. What is the problem here ? You write a story about a generation claim all numbers wrong and what is this article worth now ?
Posted by: Bob at 09/22/2010 11:46:56 AM
What was the purpose of this article? An ad for Zipcar and Hetz?? Most young people simply can't afford a new car and the huge cost of new car auto insurance. They are making less money due to businesses outsourcing, illegal workers, and H-1b visas. Your first line should have read "The" (INCOME) "gap is a growing, long-term headache for automakers." Car sales will never recover to the levels of years past because it just won't be affordable to the masses. Even the baby boomers won't be able to help their kids that much longer as they themselves are moving to lower retirement incomes. If auto companies want to survive, they need to switch to smaller, lower priced, quality built, more fuel efficient diesel autos. Save the high priced hybrids for the luxury cars until costs can be reduced to affordable levels. The profit margin won't be as high but at least they might stay in business. Of course the only real solution to this problem is to "Hire American and Buy American". If you buy foreign then don't be surprised if you and your children eventually have to accept the global foreign wage.
Posted by: Chris at 09/22/2010 08:36:47 PM
I actually disagree with the below two posters entirely. I'm 28 years old, married with a child. Both my wife and I make over 6 figures each and we car pool to work. We have a second car as a back up, but slowly phasing it out completely. The car we do use is mostly just used for work. Everything local is done by walking or bicycle. We also know many, many people who are fresh out of college with decent paying gigs taking public transportation.. I do believe a lot of this is mind-set
Posted by: nl at 09/30/2010 01:00:24 PM
"28 years old..making over 6 figures..." That is 6 years after graduating from college. What kind of work do you do? I am in my 40's and it took me a while to get to a 6 figures salary. Tell me something I don't know.
Posted by: Wes at 10/01/2010 03:52:54 PM
Disposable income has gone down, college debt has skyrocketed, and the job market is somewhat bleak. Those who are graduating and getting jobs are opting to pay higher rent and live closer to work than to live in a quiet neighborhood, commute, pay car loans, and pay gas expenses. It may have something to do with car prices, gas prices, and/or the fact that Gen Y has less employer loyalty compared to previous generations. They tend to move around a lot from company to company and city to city. Why commit to an overpriced house for 30 years when you can rent for a year in walking distance to work? I have a site called theechoboom.com for some other neat facts about Gen Y.