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New-car buying by young rises after years of decline

September 28, 2012

Young buyers are inching back into the new-vehicle market after several years on the sidelines, helped by easing credit and a slightly improving job market.

"Younger buyers have returned to market at a higher rate than any other age category," according to a recent report by J.D. Power and Associates’ Power Information Network.

The young buyer group, from teen years through age 35, is a hefty 23 percent of so-called retail buyers, the highest since 2008, according to Power. The retail sales category excludes multiple-vehicle sales to fleet buyers, such as rental-car and taxi companies.

Data from Polk, which tracks new-vehicle registrations, not sales, found a similar trend, showing buyers ages 18 through 34 are 12 percent of all new-vehicle registrations from January through July this year — the highest since 16.4 percent in 2007.

Power’s Thomas King said that high used-car values could be helping younger buyers who have something to trade-in or sell. Credit is also easier to get, and "We are also seeing growth in longer-term loans, 72 months and over," which reduces monthly payments, he said.

Long loans, however, can lock buyers into long ownership. It takes years before the loan balance is less than the value of the car, delaying the next purchase.

Still, the rebound is huge for car companies, which depend on an influx of youthful customers as their lifeblood:

Younger shoppers don’t buy high-profit vehicles at first. But if they can be well-served and kept loyal, automakers believe they’ll move up to very profitable models as they get older and richer.

Big gainers with young buyers: Hyundai and Kia. Polk says together they had 11 percent of the new-vehicle registrations by young buyers, up from just 5 percent in 2007. European makers, mainly Volkswagen, also grew, edging up to 4 percent.

Polk says Detroit makers, meanwhile, fell 3 points to 37 percent of the group. And Japanese brands tumbled 6 points, to 41 percent.

Tom Libby, an auto analyst at Polk, said the theory that younger consumers just lost interest in new vehicles and are interested instead in being online is false.

"They are as interested as ever," said Libby, "and when economic conditions improve, they’ll come back."