“She loves me. She loves me not.” Even adults engage in versions of this classic petal-plucking exercise, particularly when it comes to owning cars. In recent years, ride-sharing services like Uber and Lyft have become global forces. Hourly car rentals are available from companies like Zipcar, and both tech companies and automotive giants are investing in self-driving cars.
Is a new generation, Generation Digital – those born surrounded by technology – bringing the end of one of our longest-running love affairs, with driving?
Not so fast. While the long term has yet to play out, in the short term, consumers still want to own cars.
What the numbers say
After years of pent-up demand during the Great Recession and slow recovery, people are starting to buy cars again. Automotive News reports that the average number of new vehicle sales per US dealership rose 4.8% in 2015 to 966 units, the fourth consecutive annual record. Additionally, nearly 17.5 million vehicles were sold in 2015, up 6% from 2014 and setting a record in the US. Sales eclipsed the previous high point in 2000 when 17.3 million vehicles were sold.
The sales increase is in contrast to some high-profile data points – most notably that driver’s licensing among young people has declined. The percentage of high school seniors with driver’s licenses declined from 85% to 73% between 1996 and 2010, according to the AAA Foundation for Highway Safety. Federal data suggests that the decline has continued since 2010. In addition, a recent research survey by FICO indicates that adults 18-24 are the largest group of non-drivers (13%).
What’s behind the drop in young drivers? Many colleges and universities have implemented deliberate strategies to reduce the number of students with cars on campus. With roughly 40% of 18 to 24 year olds enrolled in higher education, such measures might play a role in reducing youth driving.
With this increase in young people without licenses and not driving, we wanted to understand a bit about the zero-vehicle household. Is that a new phenomenon, and what is driving it?
According to data from the Federal Highway Administration, “zero-vehicle households” have been holding steady at about 10 million since the 1960s, while the number of 1, 2 and 3 vehicle households has grown significantly. The most typical zero-vehicle households encompass two very diverse Americas, one better off and one quite poor. Roughly 4% of those households earn more than $80,000 annually, a wealthy group concentrated in and around New York, with access to plentiful public transit. Yet 70% of US zero-vehicle households earn less than $30,000 per year; thus economics is their key driver.
Back to our growth story
Many millennials are in college and aren’t driving due to campus parking restrictions or living on campus with little need for a car. Still others are buying cars, particularly those over 25. According to Bloomberg View:
“In 2014, [JD Power] first reported that millennials had passed Generation X in new car buying. Last spring, it said millennials’ share of new vehicles bought had skyrocketed to 27% in 2014 from 18% in 2010.”
FICO’s new research reinforces this same point. We found that nearly 40% of 25-34 year olds said they were “very likely” to purchase a new car in the next 12 months, compared to 28% for 35-49 year olds and 15% for those 50+.Download FICO’s new consumer research report on auto purchasing behavior trends.
