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Generation Y will buy cars when paychecks allow, new study finds

March 28, 2014
Young Americans will buy automobiles when their pocketbooks and paychecks eventually allow them to make such a large purchase, according to a new study by Deloitte LLP.
The study found that those in Generation Y — a generation of nearly 80 million Americans born after 1980 — have specific ideas for what they want in a car. And though they don’t have the same affinity for vehicles as their parents and grandparents have, an overwhelming majority of them still want to own a car or truck.
"While Gen Y may not necessarily scrutinize horsepower, acceleration times or engine size, they do have clear needs, wants and desires, especially when it comes to remaining connected to all of their lifestyle technology while on the road," Deloitte’s Masa Hasegawa said in a statement. "This is good news for carmakers, who already offer — or are bringing to market — many of the features Gen Y consumers most want in a vehicle."
Those features include alternative powertrains — hybrid and electric cars — and the latest technology.
The report, which surveyed 2,000 U.S. consumers, including 677 in Generation Y, found that three in five young people plan to buy or lease a car in the next three years.
Fewer than one in 10 says they plan to never buy or lease a car or truck.
Practicality over performance
The number of teenagers with driver’s licenses is off nearly 20 percent in the past decade, according to the Federal Highway Administration.
Young people are delaying taking road tests. Nearly half say they’d rather communicate digitally than hop in a car and, say, cruise Lake Shore Drive with friends. And those who do want a car say they prefer practicality and efficiency over performance.
But most of that can be attributed to the time frame in which this younger generation grew up. Their prime car-buying age came about when the U.S. went through the beginning stages of the Great Recession.
The unemployment rate in that age group reached historic highs in 2009. Coupling unemployment with skyrocketing vehicle prices and large student loan debts, vehicle ownership hasn’t yet been affordable for most.
The Deloitte report found that 80 percent said the biggest barrier to owning or leasing a car is the cost.
Lowering price points
Ford Motor Co. CEO Alan Mulally said the automaker will focus on smaller, less expensive vehicles as a way to tap into new customer bases, including young people.
Mulally stressed the need for the industry to lower price points and make vehicles more affordable.
"We have to find a way," he said. "All of our data say the economics are very, very important."
There also are industry trends that, while in the infancy stages, could be turning off young people. Sales and offerings of diesel-powered cars and trucks, for example, are on the rise because of their increased fuel efficiency.
But those cars and trucks still are more expensive than gas counterparts, and three-quarters of Gen Y have never driven one, according to a recent online survey by Harris Interactive, on behalf of Honeywell International Inc.