US Love Affair With Cars Nearly Finished

-edited

At increasing rates, millennials and generation Z see no need to get a drivers license.

The Wall Street Journal has an interesting article that strikes right at the heart of the auto industry: Driving? The Kids Are So Over It.

About a quarter of 16-year-olds had a driver’s license in 2017, a sharp decline from nearly half in 1983, according to an analysis of licensing data by transportation researcher Michael Sivak.

Whereas a driver’s license once was a symbol of freedom, teenagers are reaching their driving age at a time when most have access to ride-hailing services such as Uber and Lyft to shuttle them around town. At the same time, social media and video chat let them hang out with friends without actually leaving the house. When they reach their 20s, more are moving to big cities with mass transit, where owning a car is neither necessary nor practical. And of those who do buy a car, many more than in older generations opt for a used one, according to J.D. Power.

A new mind-set among many Generation Zers—roughly those born after 1997—is confounding parents and stumping auto makers at a time when new-vehicle sales in the U.S. are slowing. J.D. Power estimates that Gen Zers will purchase about 120,000 fewer new vehicles this year compared with millennials in 2004, when they were the new generation of drivers—or 488,198 vehicles versus 607,329 then.

“That freedom of getting your own wheels and a license—and that being the most important thing in life—is gone,” said Brent Wall, owner of All Star Driver Education in Michigan, a chain of drivers’-ed schools. He said the average age of students in his class is rising. “It used to be the day they turned 14 years and eight months, everybody was lining up at the door. Now I’m starting to see more 15- and 16-year-olds in class.” He frequently hears from parents that they’re the ones pushing their children to enroll.

Cooling on Cars

Cost vs Convenience

Cost is an issue. Detroit is busy churning out SUVs that cost well over $30,000. The cost of insurance is rising.

One can forgo a car but not a place to live. Housing costs have risen far more than the stated rate of inflation.

Death of the SUV

So who has been buying all those large SUVs? Retiring boomers and those flush with assets from the latest Fed-sponsored bubble.

Boomers won't live forever. Nor will the stock market bubble. And just around the corner are fleets of driverless cars and a wave of new services around those cars.

Attitudes

At the heart of this shift is huge change in attitude about cars and housing coupled with amazing technological advances.

Millennials and Generation Z saw what happened in the the Great Financial crisis and the first few years of the rebound. They saw their parents arguing over debt in fear of losing their house. They do not want to fall into the same trap.

We boomers did not have social media outlets when we were in high school and college. Nor did we have cell phones. If you wanted to do something you had to drive or get your parents to take you.

I spent countless hours as a high-schooler, even on weekdays, just driving around going nowhere. Gas was 20 cents a gallon.

The Future

The auto industry will soon not look like what it does today. Cars will be smaller, lighter, electric, and self-driving. Boomers will be gone. Those living in big cities will not need to own a car at all, and most won't.

Boomers are the primary force keeping the current auto trends alive. Demographically-speaking, it won't last.

Expect massive change within a decade, on multiple fronts, including outright ownership.

Mike "Mish" Shedlock

Comments (46)
No. 1-21
Seb
Seb

Amen. Insurance is a racket. My kids don’t want to pay that much. My kid throws up when she thinks about the cost of a car AND college AND a house. Mish you talk about the younger generation and how they’ll do it differently- and they will. My kids talk a lot about crypto with their friends. They don’t trust the dollar. I asked my daughter about how the government will pay its debts and she believes they’ll print money to cover it. Thats what’s in their heads right now. They don’t really care for gold unfortunately. My daughter says it’s too cumbersome. You can’t make change. It’s not convenient. Just giving you some anecdotal stuff from one Hugh school senior.

Seb
Seb

Just now I asked her in the currency started to fail what would her plan be? She said she’d change to crypto. I said crypto is volatile and she said “it’s all volatile probably then”. I asked her why wouldn’t she buy gold and she said “where?”. She said she knows how to buy bitcoin but has no idea where to buy gold. I told her there’s online places to buy gold and they’d send it to her and she said” that takes too long”. More anecdotal at our breakfast table right now. Yes we are eating late for breakfast. Just info on her. She’s a weighted 4.7GPA student who wants to go to med school.

Maximus_Minimus
Maximus_Minimus

Where I live, I balk at the price of car insurance. I can't imagine how a teenager can afford one (or most of the population). Slightly off topic; the German IFO institute (not a fly-by shop) study finds EV in total emit more CO2 than diesel:

davebarnes
davebarnes

As a boomer (with a 2007 Audi 3) who is waiting for a better selection of electric cars, I agree with your future prognostications. We will go 100% EV. It will be small, but a bit higher off the ground as we are aging and want easier entry/exit. We will lease as technology is changing so rapidly.

You do have to account for the fact that we Boomers will be around for another 25+ years.

nic9075
nic9075

Uh the average price of a USED car is $20,000.. Not long ago you would be able to buy a decent 10 year old Toyota Corolla or Honda Civic for less than $10,000 now they are closer to $15,000 for a ten year old model with less than 50,000 miles on the odometer. Then of course the cost to register a car, yearly excise tax, annual state inspection and of course repairs

nic9075
nic9075

Well in the NYC metro area (and the suburbs of course) where the average rent (or mortgage payment ) is well over $2,000 a month, plenty of young people (just out of high school or in college) drive and somehow they can afford late model SUV's like the Acura MDX or a nearly new Jeep Cherokee

Tocino
Tocino

It is just postponed demand. I got my driver license at 16 years old and used to drive my mom's car. I bought my first car at 25 years old. May be they will buy their first car at 30 years old ?

Sechel
Sechel

car prices keeps going up. if you live in a city the cost of storage fees and maintenance just add to that. with stagnant incomes car ownership will just be a casualty. i'm half way there myself, current car is close to 14 years old, previous car went 13 years and i'm highly doubtful i'll replace it when the time comes.

Tengen
Tengen

As an X'er who first got his license in the early '90s, I've got to say that nearly every part of the driving experience has declined since then. I like the cars better now (or maybe I can afford to have much better than when I was younger) but everything else leaves a driver wanting.

The cars are more expensive and loan periods keep growing. The roads have gotten far more crowded and the drivers more aggressive. Police has shifted from some semblance of "serve and protect" to outright revenue generation. I keep reading that more cameras are coming, not just for intersections but in general, which will further degrade the experience. Nothing like driving along knowing you're being constantly watched!

The Millennials I talk to definitely don't seem to enjoy driving as much as previous generations, signalling a real shift in attitude. I don't blame them, but some of my favorite memories were road trips in pre 9/11 America, with no cell phones and the feeling of actually being "off the grid" as you see new parts of the country. Those were some good times that younger people will unfortunately never know.

2banana
2banana

For the last 60 years - and soon to include generation Z:

Living in a city is sooooo cool for young 20 year-olds. You can walk to bars, bring home a sexual partner drunk, cool cultural exhibits (that you never go to) AND the vibe! Especially the vibe! You just can't get that anywhere!

But eventually...they will want to marry have children. Maybe even save something and even own a house without people pooping in their front yards or shooting up on the sidewalk.

And then the one party democrat 60 year unbroken rule of massive city corruption, high taxes, failing schools, out of control crime, crumbling infrastructure, insane public unions, etc., etc. etc eventually forces them to see the light.

Cities are then just not that cool anymore.

And you need a car for the suburbs.

ksdude
ksdude

Stay home, vape and play video games or get a job for min wage so they can pay a $500 month for 72 months and $200 for full coverage insurance. Maybe we're the stupid ones.

Nmcoyote1
Nmcoyote1

I saw a recent detailed article linked to a study about millennials and younger generations. What they found is that consumerism has not changed much. If anything it’s increasing, It has just been delayed. They are driving more miles than baby boomers did at the same age range. They travel more than previous generations in their 30’s did. Spend more on vacations and other items. They own the same amount of cars as older generations (within a few percent) the main difference is that younger generations are delaying most major life activities by several years. Things like marrying, having kids and purchasing cars/ houses till 5+ years later in life. They also showed how millennials are starting to leave the inner city’s for the outskirts in large percentages. It appears that what people thought was happening is wrong.

BoneIdle
BoneIdle

I'm a semi retired Boomer in his late sixties. I still need to commute to the city a few days a week. I usually took my car on the 10 mile commute. I had access to fee city parking. I have taken up cycling. I now cycle the commute. Is it dangerous? Not really I'm passing stationary cars most of the way. Bike commute time 35 minutes, car travel time - up to one and half hours. Public transport - train 50 minutes - after I have driven to the train station.

Rather than use the car for many journeys I have been taking the bike.

My fuel bills have halved. Enough to justify an expensive bike.

I own my cars outright. They are doing less than half the mileage now then before bike. They will last much longer. Maintenance costs are down. I wont need to buy another car for quite a few years. I only buy cars when the depreciation has worn off them.

Carl_R
Carl_R

Is it a cost issue? Well, I very well remember buying my first new car, a 1976 Honda Accord, for $4622. Adjusted for inflation, that's $21,132, a bit less that a current Honda Accord, which is $23,720 for the closest model. Now, the new car has a lot more bells and whistles than the old one, including computers, but also things like air bags. The new one weighs nearly twice as much (3100 lbs to 1800 lbs), but gets better gas mileage. Factor in that interest rates are far lower than they were in the 1970s, and your payment today, adjusted for inflation, would be significantly less than 40 years ago. So, the modern car will have more features, get better mileage, and also will have lower payments adjusted for inflation. As I mentioned in another post, your insurance today will be lower today than it was 40 years ago, adjusted for inflation, as well.

So, no, its not a cost thing. It's that kids today have different values than we did, and they spend their money other ways. Or, maybe it's that we wanted that car so badly, we worked more hours, and had more to spend.

Top-GUN
Top-GUN

Not being able to Drive,,, another skill the young folk lack,,, no wonder they have less value to an employer...

jivefive99
jivefive99

Im gonna bet this "trend" will end very soon, and that includes the "trend" where they dont want to buy houses either. Real life will force the young people to reconsider, when there arent any more gullible people who want to work for free for Uber and Lyft (essentially they pay you with your own car). There are lots of reasons why this generation is trying to avoid the expense of housing and cars. It wont last.

WC Fields
WC Fields

Everything about owning a private vehicle has become enormously expensive - maintenance, insurance , purchase price, fuel. Back in the day you buy a good used car for $300.00 that could be worked on by the owner - it was simple , tough and roomy and it actually had styling that made it unique. No longer , there is nothing that is the least bit inspiring or motivating about modern cars , yes they have better brakes and get better gas mileage but they are boring mountains of plastic that have no intrinsic value or aesthetic appeal and require a bank loan to fix. Inflation and government regulations have killed the auto industry with the bean counters digging the grave.

MorrisWR
MorrisWR

I don’t know that I buy the argument. Perhaps in big cities but my kids and their cousins have cars (or want one). My kids were born in 2000 and 2002 and got used cars when they were each 15. Paid cash and I we do most of the maintenance. He deal was they go to college early (after 10th grade) to get 2 years of school paid by public system and they we buy them each a used car. Saves us money and they now have freedom (as do we). Ride sharing is great but it also costs money. My kids also do not like social media or using their cell phones. They are also both in engineering so maybe they are not typical.

oooBooo
oooBooo

There are multiple issues. The first and largest is graduated licensing. This makes a DL pretty useless at 16. With all the restrictions on it, what's the point? Then there was the wanton destruction of cars called "cash for clunkers" that made used cars more expensive. Then the increasing minimum wage that makes teenagers increasingly unemployable economically.

Then there are the agenda 21/2030 issues that are attacking personal motorized transportation on many fronts. Because transit doesn't work well those who want transit and those who simply wish to engineer society and control people's movements make motoring ever more difficult and expensive. The new urbanists are a good example. Politically robot cars and electric cars are being pushed with no real market demand for them.

In conclusion makes private automobiles desirable has been under attack deliberately for decades now and those who want to control transportation are winning.

KidHorn
KidHorn

I have a 20 yo who drives our old minivan. Mainly to community college and back. He likes the minivan. He'll be going to a 4 year college in a year or so. I told him he could live at college or make the 30 minute drive and if he chose to live at home, I would buy him a new car with the savings. He smartly wants to live at home and get a new car. He wants a small sedan.

I have a 16 yo who desperately wants to get her license. She can't get it until she's 16 and 6 months. Which will be in August. She also said she wants a small car. But she definitely wants to drive. Many of her friends haven't done anything towards getting a license, but for many it seems like it's their parents who don't want them to get a license. They don't want to pay for their insurance.

I drive an SUV and my wife a minivan. We have 3 kids and have to drive them and their friends around. so we need a large vehicle. It's the same for other parents in our school district and neighborhood. Almost everyone drives a minivan or SUV. Once the kids are on their own, we'll likely settle on a single smaller car.

Guinny_Ire
Guinny_Ire

I'll throw a twist out there. Drinking and driving. Teenagers are no different than they were 10,20,30,40, 1000 years ago. 16 in that middle of the distribution curve area where teens are experimenting. And what has happened in the last 25 years? MADD, sex education in the public schools (not the same sex ed you had 20 years ago), and increase scrutiny to control their behavior. To be a kid is to be a problem solver. We've given them the tools, we've given them the funds, and they are not going to be denied having fun. So they drink white liquor because it's easier to disguise and many have convinced their parents they take ubers to be safe. They also DD alot. And many parents would rather drive them than have them possibly drink and drive on the weekends. So yes, you have a whole generation not worried about driving because they don't need to I'd be more interested in how many people are getting their drivers licenses in their 20s.