Even though younger generations are buying, older consumers still fiercely drive most of the auto industry’s growth
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As the year comes to a close, automobile sales reports start pouring in with the who’s who of the carmaker industry for 2016.
While the industry is still recovering from its 2009 annual sales failure, it’ll be happy to know that slowly but surely people are beginning to buy cars again. This is especially true for the oldest millennials who, due to student loans and a declining job market, are only just beginning to head to the dealership lots. However, car sales in the United States are still expected to fall 6 to 8 percent overall this year. Younger people continue to find ways to get around “no purchase necessary” through companies like ZipCar, Uber, and Lyft.
This year's reports anticipate a growing trend of SUV purchases compared to sedans of yesteryear; which would make sense if millennials are also starting families later than generations before. This trend suits the auto industry well, especially companies like GM, because sales of SUV and trucks are more profitable.
Even though younger generations are buying, older consumers still fiercely drive most of the auto industry’s growth, with the average car owner in the U.S. being 41 years old according to our data. In fact, many car brands depend on older buyers for a majority of their business. While Scion’s average customer was approximately 34 years old --the youngest average based on our data-- buyers of luxury brand vehicles like Lincoln, Jaguar, and Rolls Royce were the oldest, with an average age of 49 to 50 years. The average manufacturer’s suggested retail price (MSRP) for a higher end car like a Jaguar is around $57,734 while something like a Scion checks in around $17,122. Other popular low end vehicles include Honda and Mazda.
Millennials tend to invest in car brands that make ownership attainable for someone starting out with debt, like a Scion or Honda, while older consumers most likely have a savings and reason to indulge. Surprisingly, there were some luxury brand vehicles on the younger side of our graph including Lamborghini and Audi. We’ll have to assume these are outliers (or should I say Audi-liers) for a typical 35 year old in the U.S. Even so, age is not the only factor that influences how much a person spends on their car; location also has something to do with the average amount people are willing to spend on their wheels.
You may or may not be aware that your home address affects how much you’ll end up paying for car insurance, because of risks like traffic and theft, as much as other factors like your age or driving record. So if someone is able to afford the higher cost of city living, they’re more likely able to afford a luxury brand vehicle. According to our table, the states who pay the most for their cars are Washington D.C., Massachusetts, New York, Texas, and California, all with MSRP prices of $27,000 or more. These states come as no surprise when you consider they are home to the most expensive cities in the U.S., New York City, Boston, and San Francisco according to Investopedia. Washington D.C. tops the list with an average MSRP of $30,127, while Kentucky residents pay the least for their vehicles at an average of $22,713.
Even though the auto industry is beginning to see a decline in the average consumer age, high end automakers could be doing more to tap into the millennial market; whether that is offering lower priced car models, special finance and lease options, or tech integrations like wifi. The younger generation seems to care more about capability than brand recognition. There are a large range of preferences when it comes to car buying in the U.S., as our data shows. And so, for manufacturers to disrupt the market they would have to incorporate form, function, and feasibility for new and seasoned car owners alike.