Spending power keeps an economy ticking. Today, the largest category of spenders in the US economy, is the Millennial Generation, as the saying goes, “With coffee in one hand, and confidence in the other.”
The former high spenders, the Babyboomers, have already exited the arena, and the spotlight is now on their grandkids, the Millennials. The Millennials are distinguished from other generations before them, by the fact that they are the first generation to be “digital natives,” as they grew up with the Internet and social media. Generation X, the generation squeezed between the self-centered Boomers and the equally egocentric Millennials, are getting buffeted by societal forces to give way. Even as earlier generations veered towards the TV for all their entertainment and emotional and information needs, millennials turn to social media like YouTube and Snapchat. When people need to convey messages to millennials, they customize their material through social media in a manner that captures millennial attention. As CEO and Founder of Tribal Brands Inc., an industry leader in mobile marketing, said, “Young people need to be asked what matters, not be told what matters.” They want to be engaged in issues, not be marketed to. The Millennial Impact Report by the Case Foundation quotes, “I want to be inspired. Help me understand very clearly what I can do to help address large problems.”
Contrary to popular opinion that millennials are self-indulgent and narcissistic, many millennials are, in fact, making very practical choices. With mountains of student debt to pay, many young people born between 1982 and 1994 are living with parents, and have postponed making critical life choices until they feel they are ready. This trend in being felt in many industries, including the automotive industry.
The car and automotive industries, which make up the core of the American economy, have been wracked with uncertainty, as millennials postpone buying cars. However, like in other areas, millennials are probably just postponing, and not abandoning buying cars altogether. In fact, they are probably inclined toward buying a car younger than the X Generation did.
Auto manufacturers have been trying to understand the car buying habits of millennials, and they have come to understand that millennials are a large group with assorted ideas and opinions about cars. In fact, they are basically nothing like previous generations. As President of the California New Car Dealers Association, Brian Maas, said, “When you think about it, people are having families later, they’re getting married later, they may be leaving their home later — all of those factors. So it makes logical sense that they might buy their cars later too.”
However, for quite a while, auto makers and industry players were anxiously watching and waiting for millennials to get on with the prime initiation into adulthood – buying a car. And it did not happen. Subsequently, the University of Michigan’s Transportation Research Institute released a report recently, which showed that more young people were rejecting opportunities to get their driver licenses. However, J.D., Power recently publicized the first-ever Millennial Insight Report says, “Millennials are not as fickle or anti-establishment as you think.”
LendEDU, an online marketplace for student loan refinancing, recently conducted a poll on millennial car habits. Over 93% of 501 car-owning millennials said owning a car is a necessity today. However, only 79.2% believe that owning a car is a necessity in 20 years. What also stands out is that 16.57% of car-owning millennials polled said they were re-thinking car ownership because of ride-sharing services like Uber and Lyft. A few years ago, such choice was non-existent. Over half of polled millennials preferred to own an environmentally-friendly or “green” car and 50.1% liked the idea of self-driving cars over traditional cars:
In today’s context, buying a car is an expensive liability, taking into account its high purchase price, depreciation in value over time, maintenance costs and unanticipated mishaps on the road. Therefore, most people resort to car loans as a sensible way to pay for a car without destabilizing their finances. Of the car-owning millennials who had taken a loan to buy a car, 71.19 had not paid up their loan completely while 28.8% had completed their payments.
In earlier generations, owning a car was symbolic of freedom and of being grown up. It also stood for prestige and class. However, millennials, it appears, could care less. An online survey for NerdWallet, the personal finance website, found that 75% of millennials who own a car, plan on buying another car in the next five years. But there was no enthusiasm for it. On the other hand, 43% of millennials who owned a car, described it as “a hassle.” One millennial, 26 year old Elizabeth Slome, who relocated to Santa Monica, California, from New York, said, “Driving gives me anxiety. I also don’t like to look for parking.”
Many millennials look for practical and economical cars, rather than luxury. But being digital natives, they look for cars with features that can seamlessly conform to the technology in their smartphones.
From all accounts, millennials appear to be a generation like no other. As media/social futurist, Mal Fletcher says, “Millennials expect to create a better future, using the collaborative power of digital technology.” As optimism abounds, probably they will.