Transportation

Young People Choosing Not to Spend Discretionary Income on Cars

By Ryan McGreal
Published August 08, 2012

Yet another newspaper article is exploring the fact that young people just aren't that into cars. A recent essay published in Wheels, the Toronto Star's automobile pull-out, reports concern by the auto industry that young people are buying fewer automobiles.

A combination of lower wages for the youngest workers and the generation's tendency to favour gadgets over cars may cap average U.S. auto sales at about 15 million annually, said Dan Luria, a labour economist at Michigan Manufacturing Technology Center in Plymouth, Mich. The peak for sales was 2000 at 17.4 million cars and light trucks.

"Now, technology not only competes," Luria said, "it competes and wins."

This is already turning up in sales numbers. Young drivers used to account for 17 percent of auto sales, but that rate has declined to 11 percent this year, accounting for the 2.4 million unit drop in annual sales since 2000.

It's not just that young people aren't driving cars, either. The share of 20-24 year olds with drivers licences has fallen from 92 percent in 1983 to 81 percent in 2010.

To be sure, part of the reason is that young people have less money to spend on an automobile. However, they are choosing to spend the money they do have on communications technology instead of a car.

Smartphones, laptops and tablet devices compete for their dollars and are higher priorities than vehicle purchases, said Joe Vitale, an automotive consultant with Deloitte.

Financing, parking, servicing and insuring a vehicle all add up to a commitment that cash-strapped Millennials aren't ready to make, he said.

"A vehicle is really a discretionary purchase and a secondary need versus an iPhone, mobile phone or personal computer," Vitale said.

Between ubiquitous communications technology that is incompatible with driving and a shift toward more urban living, Generation Y consumers neither need nor particularly want cars the way their parents did.

See also:

Ryan McGreal, the editor of Raise the Hammer, lives in Hamilton with his family and works as a programmer, writer and consultant. Ryan volunteers with Hamilton Light Rail, a citizen group dedicated to bringing light rail transit to Hamilton. Ryan writes a city affairs column in Hamilton Magazine, and several of his articles have been published in the Hamilton Spectator. He also maintains a personal website and has been known to post passing thoughts on Twitter @RyanMcGreal. Recently, he took the plunge and finally joined Facebook.

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By Borrelli (registered) | Posted August 08, 2012 at 11:49:55

To be sure, part of the reason is that young people have less money to spend on an automobile. However, they are choosing to spend the money they do have on communications technology instead of a car.

And I think that choice might be more important than the shackles imposed by low wages. When I was a teenager working at a certain Italian grocery store chain, my (male) coworkers would drool over issues of Auto Trader and plan their next ride. No one was spending a ton on these (very) used cars, and I would suggest that their cost wasn't too much above the $2000-3000 that some young folks spend on their computers and phones. So I think, yeah, there's a very different set of interests driving this group of young people.

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By Robbie K (anonymous) | Posted August 09, 2012 at 09:07:15 in reply to Comment 79610

But how cheap was gas and insurance?

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By Borrelli (registered) | Posted August 09, 2012 at 10:09:29 in reply to Comment 79623

Well, gas certainly was cheaper, and if you're young and a secondary driver or have a cheap car, insurance wasn't onerous. Carrying on w/ the analogy, I doubt monthly gas and insurance costs 15yrs back were much more than many young people currently pay for internet and cellular connections.

Now, though? Well, I sure think my gas and insurance costs are approaching "unjustifiable" while data costs are falling or at least stable.

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By ScreamingViking (registered) | Posted August 08, 2012 at 20:34:58 in reply to Comment 79610

When I was a teenager working at a certain Italian grocery store chain, my (male) coworkers would drool over issues of Auto Trader and plan their next ride. No one was spending a ton on these (very) used cars, and I would suggest that their cost wasn't too much above the $2000-3000 that some young folks spend on their computers and phones.

I can believe that.

Partly because I was working at probably the same certain Italian grocery store chain, and that memory holds true for me too. :-)

Other than stereos and the game consoles and cheap computers of the day (and my "day" would be the mid-to-late-1980s) there was not a whole lot of techie stuff on which to spend part-time and summer wages.

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By Sigma Cub (anonymous) | Posted August 09, 2012 at 08:09:49

I think the stats on drivers licenses is probably the more telling trend.

Despite glagging sales, there is also the possibility that they don't *need* to buy a car because they can borrow one easily enough. Because of design or economic neccessity, young people aged 20-34 are also living at home longer, in households that have more vehicles (and fewer children) than previous generations.

Compared to their parents' generation, they're also far more likely to live in a major metropolitan area with a well-developed transit system.

Status might also be a nominal factor. $2,000 will typically score you more when buying a laptop than it will a car. (Although even in the face of peak oil, a car probably isn't lashed to the obsolescence cycle the way that technology is in our upgrade-obsessed culture. Laptops age out around 4-5 years; most cars currently on the road in Canada are more than twice that old.)

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By highwater (registered) | Posted August 09, 2012 at 08:48:07 in reply to Comment 79619

I think the stats on drivers licenses is probably the more telling trend.

The number of teens getting their licenses is also dropping. This is an American study, but I'd be surprised if Canadian stats are far off.

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By Sigma Cub (anonymous) | Posted August 09, 2012 at 09:29:53 in reply to Comment 79620

Caught that in paragraph 3/4. Not disputing. Just acknowledging, conversationally, that licensing is amore definitive measure of car use than ownership.

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By highwater (registered) | Posted August 09, 2012 at 09:05:45 in reply to Comment 79620

This is an American study, but I'd be surprised if Canadian stats are far off.

On further reading, it seems the study looked at 15 countries, including Canada.

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By highwater (registered) | Posted August 09, 2012 at 08:53:39 in reply to Comment 79620

Oops. Reading fail on both our parts. The article already addresses this trend:

It's not just that young people aren't driving cars, either. The share of 20-24 year olds with drivers licences has fallen from 92 percent in 1983 to 81 percent in 2010.

...although the study I linked to shows an even more precipitous drop among teens.

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By DowntownInHamilton (registered) | Posted August 09, 2012 at 10:43:11

There's a fair amount to take away from this story. A few things:

  • This is based on US millenials, who are more mired in recession than we are here
  • The numbers may be declining on those with licenses, but what are the actual numbers? Are there fewer people in the age bracket as compared to almost 20 years ago?
  • Certainly, the prices of gas, insurance and add-ons in vehicles must account for some of this. Like the article says, millenials are willing to pay up to $3000 to get additional tech features into the cars.
  • Also, the article says that they may buy used, rather than new, especially when strapped for cash.

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By highwater (registered) | Posted August 09, 2012 at 12:09:34 in reply to Comment 79626

This is based on US millenials, who are more mired in recession than we are here

The University of Michigan Transportation Research Institute study that these stats are from, was an international study.

The numbers may be declining on those with licenses, but what are the actual numbers? Are there fewer people in the age bracket as compared to almost 20 years ago?

The stats are percentages.

Comment edited by highwater on 2012-08-09 12:12:02

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By Sigma Cub (anonymous) | Posted August 09, 2012 at 11:42:18

National Post, Aug 9, 2012

Renting is safer than buying
Financial crisis makes young adults too insecure to make major purchases

Excerpt:

Cliff Zukin, a professor of public policy and political science at the Edward J. Bloustein School of Planning and Public Policy at Rutgers, the state university of New Jersey, says this is a generation that is scared of commitment and wants to be "light on their feet."

"What once was seen as a solid investment, like a house or a car, is now seen as a ball and chain with a lot of risk to it."
One key difference is that technology now allows companies to provide younger consumers access to what they want, when they want it and at a reduced cost, said Paco Underhill, founder of New York-based consumerbehaviour research and consulting firm Envirosell.

"Renting is something that is in play that wasn't in play during the Great Depression," he said. "To a modern generation, ownership isn't about having it forever, it is about having it when you need to have it."

Enterprise Holdings Inc. and Hertz Global Holdings Inc. are expanding in what the Santa Monica, Calif.-based research firm IBISWorld estimates to be the US$1.8-billion hourly car-rental business, a segment dominated by younger drivers and made popular by Zipcar Inc.

Startups such as Rent the Runway Inc. are supplying high-fashion apparel to satisfy those who want to wear, not own. CORT, a unit of Warren Buffett's Berkshire Hathaway Inc., is increasing its furniture-rental marketing efforts to college students and fledgling households, said Mark Koepsell, CORT's senior vice president.

"Renting makes a lot of sense," said David Blanch flower, professor of economics at Dartmouth College in New Hampshire. "They have no money and they are not buying fridges and they are not buying the things they normally buy when they set up homes. Their incomes are a lot lower."

College graduates earned less coming out of the recession, according to a May study by the John J. Heldrich Center for Workforce Development at Rutgers. Those graduating during 2009 to 2011 earned a median salary in their starting job US$3,000 less than the US$30,000 seen in 2007. The majority of students owed US$20,000 to pay off their education, and 40% of the 444 college graduates surveyed said their loan debt is causing them to delay major purchases such as a house or a car. The U.S. Consumer Financial Protection Bureau said in March it appeared student loans had reached US$1-trillion "several months" earlier.….

The shifting attitudes also pose a threat to retail sales, said Candace Corlett, president of New York-based retail strategy firm WSL Strategic Retail. Younger consumers are already comfortable buying used items and borrowing from friends. Renting will only reinforce their tendency not to buy new. "In a post-recession economy where retailers are trying to make every shopper count, it's the wrong direction," she said.

Shifting attitudes about larger purchases aren't the only reason preventing young consumers from buying. Stricter lending practices and higher requirements for down payments on houses and cars are crowding out buyers, said Prof. Blanchflower, the Dartmouth economist.


http://www.financialpost.com/todays-paper/Renting+safer+than+buying/7061418/story.html

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By ViennaCafe (registered) | Posted August 09, 2012 at 18:21:56

Well, I'm not so young, but my wife and I intend to go car free. What we save in fuel, maintenance, and especially insurance will become disposable income for our enjoyment. The insurance and oil industries have sucked enough of our financial life blood.

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By LOL (registered) | Posted August 10, 2012 at 00:29:23

Wow talk about making the numbers fit your own biases. Young drivers used to account for 17% of new car sales and that has fallen to 11% this year. What about the actual numbers of young people in society. We all know that our population is aging so of course the number of young drivers buying cars will be going down. It just cannot be any other way. Nothing to do with peak oil, living in major metropolitan areas with transit or anything else.

As far as the percentage of young people having their drivers license that is due to a variety of causes. Many youngsters know that they simply cannot afford a car so what is the sense of getting a license. Licenses are a lot harder to get then they used to be. Do their numbers take into account those who have partial licenses? My son was happy with his G2 for the longest time. The few restrictions imposed on him for not having his full license, G, were not very onerous in his eyes. Drinking is a big thing for the under 25 crowd and drinking and driving is a lot less socially acceptable today compared to when I was that age. I know several of my kids friends have put off getting their license because they know that they are going to be drinking and the 2 do not mix.

The amount of money spent on phones and laptops for most is a far cry from the cost of a car. A lot of the kids I know drool over the 2 and 3 thousand dollar laptops but none of them own one. The vast majority are $600 and down. Even my sons $1,000 low end i7 is more machine then any of his friends. Most of the machines these kids have were given to them by their parents or grandparents because they are seen as a necessity for college or university. More kids are going pursuing a post secondary education then ever before, maybe because a high school diploma has never meant less then it means today. Back in the day grade 10 was needed to start an apprenticeship. Today a course at Mohawk is pretty much a requirement. That works out to an additional 3 years of school.

There are a variety of reasons the driving and licensing numbers have declined over the years but wanting a car is still right up there for our youth, they just have resigned themselves to the fact that they just cannot get there just yet. To try and pass of these facts as young folks "...neither need nor particularly want cars the way their parents did." is just plain silly. They want them sometimes desperately they just realize that it just is not possible for them.

You may not want your own car but the vast majority of our youth sure do. It is still seen as a desirable object of independence, freedom and status.

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By haters gonna hate (anonymous) | Posted August 10, 2012 at 08:37:22 in reply to Comment 79646

Somebody's afraid of change...

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By DowntownInHamilton (registered) | Posted August 14, 2012 at 07:03:46 in reply to Comment 79648

Yeah, because dissenting opinions immediately means that someone fears change. Grow up.

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By jonathan dalton (registered) | Posted August 11, 2012 at 13:41:48

I can attest to the majority of points made in this article. I grew up in suburbia and got my license the day I turned 16. Back then there were no smart phones or social media and the internet was fairly new. A car was our way out of isolation. While I biked before I drove, cycling was very unpopular then where I lived and few people bothered. It was either waiting for a ride to the mall, or being the dude with the car.

I sold my last car just before I got my first cell phone and data plan, and feel the money is better spent. Sure the phone bill is almost as much as my insurance, but digital communications save me time. I can do things while on transit that would normally take up time at my destination. Driving was a pure waste of time. Most of the time it was not relaxing.

When I travel now I use a laptop tethered to my iphone with a 3 gigs of data and I'm there before I know it. Sure I'd consider another car if I had money to burn, but I'm quite happy with cycling, transit and the occasion carshare. The $200 plus a month it takes to own a car (I always bought cheap cars outright and maintained myself) would go far towards reducing the mortgage on my house.

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By simonge (registered) | Posted August 14, 2012 at 19:28:44

There are lots of indicators that suggest we have reached 'peak car'. Interesting article in the Economist that talks about car ownership and usage declining in downtown Vancouver as part of a larger trend. http://www.canadianbusiness.com/article/...

Comment edited by simonge on 2012-08-14 19:29:48

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By Mal (anonymous) | Posted December 03, 2012 at 08:19:14 in reply to Comment 79788

Apparently it takes an act of G*d to shift the needle:

"Auto manufacturing output in Canada has trended
level for the last fi ve months, but is well ahead of last year’s production. Real gross domestic product (GDP) of the motor vehicle manufacturing sector totaled $19.6 billion in September at a seasonally adjusted-annual rate(SAAR), virtually unchanged from August, but up 15% from September last year. Even so, output remains well below pre-recession levels. The vast majority of Canada’s auto-related manufacturing is located in Ontario.

Auto sector manufacturing will rise roughly 14% this
year following depressed production in 2011 due to the
Japanese tsunami. Production in 2013 and beyond will be more closely aligned with sales. The recovery in U.S. new vehicle sales will slow in 2013 and 2014, following a good cyclical bounce since the recession. Sales are forecast to increase, but at a slower pace."

http://www.central1.com/publications/economics/pdf/briefing/current%20ONT.pdf

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