Posted by Maria Shayna Tzouvelekis on Wed, Jul 27, 2016 @ 04:00 PM
With so many alternative modes of transportation on the market today, the automotive industry is keeping a close eye on new-vehicle purchasing data with the hope that sales don’t decline. Studies continue to analyze Millennials, questioning how their ride-sharing preferences and high student debt will affect auto sales.
A recent Federal Reserve study entitled The Young and the Carless? The Demographics of New Vehicle Purchases revealed new light-vehicle sales by four main age groups over the past 15 years: 16–34, 35–49, 50–54, 55 and over.While some studies linked declines in sales to Millennials' age and lack of automotive interests, the Federal Reserve study indicated the early analysis may have been misleading. One might say, "Age ain't nothing but a number."
Related Auto Sales Numbers
Last year, auto sales reached a record high number of 17.4 million units in conjunction with an upward trend for new and personal auto sales since the end of the recession in 2009. However, new data in the study explored a shift in the age composition of new light-vehicle buyers.
Auto sales plummeted during the 2007–09 recession, but the cause was not specific to age. Furthermore, other studies used those purchase numbers to conclude that young adults’ may not be interested in driving, let alone purchasing a vehicle.
Per the study, the average age of new-vehicle buyers has risen from 43.5 years to more than 49 years since 2000. Similarly, the average age of households purchasing a new vehicle between 2000 and 2014 rose more than five years.
"Although young buyers have been purchasing new vehicles at lower rates in recent years, the two most important factors that contributed to the rise in the average age of new vehicle buyers seem to be: (1) the aging of the Baby Boomers — a large group that continued to purchase new vehicles at a solid rate during and after the 2007–09 recession; and (2) the decline in the new vehicle purchase rate for 35-to-50-year-olds over the past 10 years."
What Does It All Mean?
It might be easy to dismiss young adults’ purchasing potential based on the introduction of new technologies; however, as the study indicated, Millennials are just beginning to grow into adulthood and in many ways are slowly showing similar purchasing habits to their parents.
Despite the many ideas that could reduce demand for purchasing autos, age did not appear to be one of them, regardless of influencing factors on young adults such as public transportation, biking and even social media which may reduce the need to travel. The study, which included controls for employment, income and other household characteristics, suggests that variances in purchasing are affected by economic and (non-age) demographic factors, including the time period between 2007–09. Furthermore, vehicle purchases are not reflecting "permanent shifts and tastes for vehicle ownership."
With that knowledge in hand, automotive dealers don't have to worry quite yet. As the economy continues to recover, we can hope that per capita buying rates will return to pre-recession levels since the study suggests new vehicle purchases could easily reach 18 million units or above in the coming years.
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Tags: Auto Dealerships