Despite high market prices, the largest demographic since the baby boomers, millennials, are buying plenty of automobiles with purchases expected to continue to increase.
Typical guidelines for car buying is that the monthly vehicle payment should not be more than 20% of a buyer’s take-home pay. According to The Detroit News, the average price for a new car is now up to $35,000, which is up 1.7% from last year, and a record high.
“There’s a lot of diversity, both economically and ethnically,” said Michelle Krebs, senior analysis at AutoTrader. “It’s really hard to treat them as a monolith.”
Despite the fact that millennials made ride-sharing services extremely popular thanks to the help of apps, and the relatively low numbers of millennials who have drivers’ licenses, this group of people born between 1982 and 1996 is responsible for roughly 30% of all new vehicle purchases.
That 30% of millennial buyers is certainly a significant chunk of the market, but it’s interesting to note the number of millennials that are not buying vehicles.
“There are plenty of reasons to not buy a car, but the overwhelming reason is not because they don’t like cars,” added Krebs. “It’s because they can’t afford them.”
A major contributor to the high vehicle prices, especially when it comes to millennial buying, is all the additional features that people want their vehicles to have that certainly cost more money.
“People who are in the market buying new cars tend to pay for all the bells and whistles,” said Krebs.
All those bells and whistles, in addition to already record high vehicle costs, certainly add up, making car ownership an expensive proposition.
Another financial issue affecting the market is that during the last few years, during which the average vehicle price increased, the median income in the U.S. fell 2.4%, making it even more difficult for people to afford new vehicles.
The millennial generation is “critically important because of the sheer numbers and buying power,” said Todd Brown, marketing manager for Chevy Cruze. “No matter what industry, these are going to be the consumers of your goods for the next 20 to 30 years.”
