Which demographics are able to go the extra mile when it comes to purchasing a car. In the past, the 35-44 age demographic was the most likely to be a car buyer. Today’s demographic facts show that times are changing… and they’re changing very rapidly.
Almost 93% of those aged 60 to 64 had a driver’s license in 2011, up from 84% in 1983.
There’s a lot of talk about how Millennials have caught up to Baby Boomers as the most populous generation in the United States. Many marketers are looking at the younger generation as a source of potential wealth. The facts here show that it might be smarter to redefine how we see aging and wealth. In 2011, only 79% of people in the 20-24 age demographic had a driver’s license.
Who Are The New Car Buyers?
- 62% of all new cars that are purchased in the United States are being bought by Baby Boomers. In 2001, this age group was responsible for just 39% of all new cars that were sold.
- Since 2001, the percentage of new auto registrations in the 18-34 age demographic has been nearly halved, falling from 24% to just 13% of the market.
- Just 1 in 4 new vehicles will be purchased by those in the 35-49 age demographic.
Why has there been such a dramatic shift in who is purchasing a vehicle over the last decade? In some ways, the current state of economics may be to blame. Many Millennials want to purchase a vehicle, but they just don’t have the financial means to make it happen. Over 35% of Millennials are still living with their parents. There is $1 trillion in outstanding student loan debt right now. 1 in 5 Millennials is postponing marriage because of money. If you’re not getting married, not having kids, and living with Mom & Dad, a car is likely out of the question.
What About the Purchase of a Second Car?
- 72% of all car loans have terms that are 60 months or longer.
- The fastest growing segment of the car buying industry are loans that have terms of 72-84 months.
- Leasing penetration has returned to pre-recession rates, around 19%.
- The average age of vehicles in operation has reached a record high of 11.4 years.
- 81% of new car buyers finance their purchases, compared to 56% of used car buyers.
- For those who have purchased a car in the past 60 months with financing, 87% of new car buyers and 79% of used car buyers still had payments remaining.
- The average down payment required to finance a new car: $2,914. This is compared to the average down payment of $868 to lease a new vehicle.
Part of the shift in the demographics of car buyers is the fact that people in the 35-44 age demographic aren’t investing into a second vehicle. Having one vehicle may be a necessity for most households, but a second vehicle is often considered to be a lifestyle choice. When funds are tight, that $2,914 for a down payment to get a new vehicle is a lot of groceries that could be purchased or could be a year’s worth of utility bill payments. Having vehicle prices surge above $20,000 for many makes and models at the same time doesn’t help matters much.
What About the Income Correlation?
- The average annual income for used car buyers: $48,004.
- About 30% of those who have recently purchased a car have a household income that fits within the highest income quintile.
- Single women purchase fewer vehicles than their population demographic, but they also purchase a greater percentage of new vehicles than their population share.
- People living in rural areas [71%] are more likely to purchased used cars than people living in urban areas [65%].
- Caucasians/Whites make up 88% of the car buying market.
- The average monthly payment for a new vehicle: $399.
Income will always be the primary issue when it comes to the car buying experience. People may need to have a vehicle, but they’ll only purchase as much vehicle as they can afford. For many that means buying used instead of new. It may mean buying a vehicle that may only last a year or two because they can only afford $500-$1,000 on the cost of a set of wheels. This is why Baby Boomers should be targeted when marketing in this market. With the most discretionary income available today and with solid debt-to-income ratios, it seems like the best way to find more profits. The long-term play for Millennials is still a good investment as well, but it may take longer than expected to pay off.