‘Adulting’: How Millennials Are Shaping Auto Trends Part II
We’ve heard all the adages about millennials before. They’re entitled. They constantly need praise in order to be motivated. They whine about wanting to work remotely. They switch jobs too often. They live in their parents’ basements and can’t stand on their own two feet. Their lives take place as much online as they do in honest-to-goodness “real” life. They demand instant gratification, want everything online, and are oddly enamored with brunch.
Millennials (also known as Gen Y) get a bad rap. And, while some of it is deserved (we’re talking to you, Mr. Man Bun), the blame for most of it can’t be laid at their feet. There are reasons why millennials have those characteristics that drive boomers and Gen Xers crazy, and few of them can be blamed on millennials themselves.
The Case for Millennials
The first members of Gen Y were born in 1980. That means it was 2008 when they were between the ages of 12 and 27. Most were graduating from high school or college and preparing to assume their roles as functioning adults. To refresh all of our memories, 2008 was the year when the mortgage bubble burst, tens of millions of Americans lost their jobs, and the entire world was pushed to the edge of a global depression. Families lost their entire savings. Millennial parents lost their children’s college funds or their own retirements — or both. Americans with decades of work experience were unable to find jobs, much less youngsters with blank resumes.
In the road to economic recovery, jobs were slow to come back, and wages were still stagnant. To escape the seemingly impossible feat of “adulting” in nine-to-five entry level jobs that were closed to them, and pushed by parents and teachers spreading the doctrine that a college education was the road into middle-class stability, legions of millennials took on crippling student loan debts to enroll in college…only to graduate four years later into an economy that still wasn’t ready to make room for them with student loan payments that took up high percentages of their monthly incomes. On average, millennials, ages 23 to 38 in 2019, carry about $36,000 in debt, according to a 2018 study by Northwestern Mutual Life.
The end result? Millennials gained a certain pragmatism at a very young age. They work long hours, often at multiple jobs, and are constantly pushing themselves to achieve the type of financial security that, as children, they watched their parents struggle to keep. Gen Y has, by force, been slower to achieve the typical milestones that many of us view as normal in the journey to becoming an adult consumer — and this is just as true in the auto industry as anywhere else.
Millennial Trends Impacting Car Ownership
All of this adds up to a generation that many manufacturers and dealers find hard to market to. In order to understand how to sell to Gen Y and how to understand and predict their auto buying habits, Team Openbay is here to isolate a few trends that influence their journey to car ownership.
The driver’s license delay
Millennials put off getting their driver’s licenses far longer than previous generations. What was the point when no vehicle was waiting in the driveway with a bow on it on their 16th birthdays? A University of Michigan study shows that just a little over three out of four people ages 20 to 24 possess a driver’s license now. The actual figure — 76.7 percent — is a sharp decline from 82 percent in 2008, and fully 92 percent in 1983.
That means that millennials buying their first cars are likely older with slightly more realistic and pragmatic goals. They may eschew the latest, trendiest muscle car or mini in favor of something with good gas mileage and a solid warranty.
Just like after the American Great Depression in the 1930s, young people flocked to urban centers in the wake of the recession. There, they could find more work, more available roommates to help share living expenses, and easily navigable public transportation. In addition, in large part because of economic restraints, many members of Gen Y are putting off marriage and having a family far later than their parents or grandparents, keeping them in metro areas longer than earlier generations.
Perhaps suffering from a societal post-traumatic stress disorder after watching their parents lose their homes, millennials are buying real estate at fewer and fewer numbers. And fewer houses in the suburbs means fewer car buyers commuting to work.
Millennials are all about social responsibility. They’re politically involved at much higher levels than Gen Xers or boomers, and they list social impact as one of the deciding factors when choosing an employer. They want their work to matter, the brands they buy to stand for something and their actions to reflect their ethics.
More millennials believe that climate change is manmade than any other generation. Seventy percent of Americans age 18 to 34 worry about global warming, compared with 62 percent of those 35 to 54 and 56 percent who are 55 or older, says a recent Gallup poll. For car manufacturers and dealers, that means millennial consumers want what they drive to be an extension of what they believe. Expect the sales of eco-friendly, fuel-efficient vehicles to do nothing but increase.
Catching a ride
All of the above factors play into the biggest trend worrying today’s carmakers and sellers: ridesharing. For city dwellers, it just makes the most sense. If you’re only going to need a car ride once or twice a week, why would you choose a car payment, parking costs, insurance expenses, gas costs, and car maintenance costs when you can just order a ride on your phone for a few bucks? Ridesharing also reduces a person’s carbon footprint and eliminates the hassles of having to park and drive in a crowded city environment. And if you have no children to take to school, football practice, or dance class, there isn’t really a compelling reason to invest in an automobile when you’re young and fancy free.
In fact, many millennials are likely to be rideshare drivers themselves. This generation is at the front edge of the gig economy, choosing to opt out of the traditional workforce and create different modes of working. A 2017 Deloitte study estimates that overall self-employment is likely to 42 million workers by 2020, with millennials leading the way.
But Millennials are Growing Up…and Buying Cars
One thing that’s often lost in conversations about millennials is that many of the exasperating characteristics older generations complain about aren’t Gen Y-specific. They’re just youth-specific. Complaining about younger generationsis an American tradition. The Silent Generation dubbed the Baby Boomers the “Me Generation.” The Boomers dubbed Generation X the “Apathy Generation.” And now we’re calling millennials … well, all kinds of uncomplimentary things.
The oldest millennials are now almost 40 years old. Even those who are late to marry and have families are finally taking that plunge. There’s also an exploding trend of millennials moving, ironically, beyond the suburbs to communities known as exurbs. These are commuter towns that are peripheral to the more affluent suburbs, where rent is cheaper but the commute times much, much longer. The Wall Street Journal reports that on average, these homes are more than 16 miles from central business districts — the greatest distance since 2004. This is, obviously, fantastic news for auto dealers looking to find an “in” to the millennial market.
Millennials now make up the fastest growing segment among vehicle buyers. That isn’t due to some phenomenon of changing generational values. It’s just logic. Boomers are aging out, and while Gen X is the smallest generation of modern times, millennials are the largest.
So fear not. Millennials might be delaying the car buying process like they do most everything else, but even in 2019, most of America still needs a car to really navigate adult life. So what are millennials looking for?
Price is an object
Millennials approach car buying just like they do anything else. They’re not necessarily looking for fully-loaded features or a sexy model first. They’re focused on what it’s going to cost to own that vehicle. They tend to care more about the monthly payment than the overall total cost of ownership. That means lengthy financing periods, but it also means vehicles with a low monthly insurance payment, affordable repairs, good gas mileage, and a respectable warranty. If you can show that a higher monthly payment may include things like free oil changes or insurance breaks, you may be able to net that higher sale.
Preowned is pragmatic
By now, you should be sensing a theme: It isn’t that millennials don’t want trendy or snazzy cars, they just don’t want them at the expense of sensibility. That’s a natural segue to the preowned lot, where they can find feature-rich vehicles, some still under warranty, at a price that’s easier to swallow than most shiny vehicles on the new lot. That isn’t to say they’re immune to brand allure, but buying a luxury car for luxury’s sake isn’t a hallmark of the millennial generation. A resource like Openbay helps keep vehicles properly maintained to go the extra mile.
Eco-friendly is essential
More millennials believe in man-made climate change than any other generation. Combined with tightening regulations in the automotive industry around emission standards, electric and hybrid cars are the undoubtedly where millennials’ money is going to go. It’s critical for any retail distributor to remember that it isn’t just the product that Gen Y wants to have a higher social purpose. That goes for the retail outlet — the car dealership — too. Want to appeal to millennials? Consider branding yourself as a dealership that cares about the environment and is committed to holding itself to a higher standard of responsibility.
Then, put your salespeople in “man buns,” and watch those Gen Yers flock in.
Stayed tuned for Part III of the Millennial Trends Series. Catch up on Part I: “Don’t Make Me Wait, Call or Think: Millennials and Auto Care” here.