Not surprisingly, the largest purchasers of new vehicles, the 55-64 group, also have the lowest unemployment rate.
Disinterest in new cars by young people is a myth that ignores fundamental economics, General Motors Chief Economist Mustafa Mohatarem said at the CAR Management Briefing Seminars in Traverse City, Michigan.
New car affordability, crushing student loan debt and higher operating and insurance costs are delaying young people from buying new vehicles. “It’s not a permanent withdraw from the market, it’s more of a delay,” Mohatarem said.
Disinterest in new cars by young people is hard to prove, but they are buying fewer cars than their generation has in previous economic recoveries, Mustafa Mohatarem said.
However, young people are buying fewer cars than their generation has in previous economic recoveries and have slightly lower rates of holding driver’s licenses.
The problem begins with the jobless recovery that still has not seen the return to employment levels or labor-force participation rates that the U.S. had in 2007. This national tragedy is having a disproportionate effect on the unemployment rates of our younger people. In May, the unemployment rates for 16-24 year olds was 24.5%, for 20-24 year olds, it was 14.2%, and for 25-34, it was 7.2%.
Not surprisingly, the largest purchasers of new vehicles, the 55-64 group, also have the lowest unemployment rate. These people purchase almost 10% of new vehicles (65+ buy 9%) or five times the rate of 16-24 year olds.
Student loans totaling more than $1 trillion dollars or 15% of the debt of people under 35 also hurts auto sales, even with low interest or zero interest rate loans. Mortgages comprise 74% of debt for this group. Auto loans are only 6% of their debt.
