Millennials will become a serious force in the U.S. car market in 2015, TrueCar said in a report this week. The car-buying site estimates that the group will purchase 4.24 million vehicles to compose 25 percent of the new-vehicle market and generate $135 billion in revenue.
That’s up 31 percent from the 3.24 million vehicles millennials purchased in 2014 and up 34 percent from the $100.9 billion the group produced in revenue. Millennials made up about 20 percent of the total market last year.
The automotive retail market is becoming more mobile, and much of the generation is aging into “family life-stage,” TrueCar said. Millennials, which TrueCar defines as people born from about 1980 through the late 1990s, are more financially prepared to buy a vehicle, with the unemployment rate for their age group dropping 12 percent in December from a year earlier. And according to car-buying sites, they will.
“Improving economic conditions are shifting the rhetoric around Millennials and car buying,” John Krafcik, president of TrueCar, said in a statement.
“They are the largest growing cohort in the market and saying they don’t like cars simply isn’t true anymore,” he added. “We know having a car means the same thing to Millennials that it does to other generations: independence and identity.”
Millennials are actually more likely to buy a car in the next six months than the total population, according to Cars.com. About 12 percent of millennials are in the market to buy, compared with 9 percent of the total population. And, 35 percent of millennials are in the market to buy a vehicle within the next year, compared with 25 percent of the total population, Cars.com said.
“There are more millennials with more money, effectively,” Simon Tiffen, Cars.com senior insight manager said. “This is also a generation that is very optimistic and aspirational. They’re looking to the future.”
In some cases, millennials will purchase their second car this year, Tiffen added.
The average transaction price for new vehicles purchased by millennials in 2015 should be $31,771, slightly below overall industry average of $32,589, TrueCar estimates.
Lacey Plache, chief economist for Edmunds.com, disagrees with TrueCar’s forecast of millennial buyers’ increased presence in the market. She expects millennials to make up a 11 to 13 percent share, in line with its share in recent years.
But Plache agrees that millennials like driving. Weak car buying from the cohort has been because of economic constraints, she said.
“Even with their decreased share of overall sales, millennials did not slack off on buying luxury and sports cars,” she said
In recent years, millennials in almost every income group continued to buy luxury cars as much or more than older buyers with similar incomes, and they purchased entry and midrange sports cars more than older buyers, Plache said.
At the NADA convention last week, MTV released conclusions of a study that found millennials are “aging up into car ownership.” Out of the 3,600 respondents, most drive more miles per month than other generations, and most value their cars more than texting and social media.
Millennials “perform real-time research,” Tiffen said. “If your mobile presence isn’t up to snuff, they’re going to claw you on it.”
About a quarter of TrueCar’s mobile buyers in 2014 were millennials, and TrueCar expects about a third of mobile buyers to be millennials this year. The company said last week that mobile shoppers have accounted for 51 percent of its web traffic at that point of the month.
