Young Car Buyers Coming Back, Picking Korean Brands
There’s a change in auto showrooms around the country. Sales to young buyers between the ages of 18 to 24 are up for the first time since 2007.
There’s also an increase this year in sales of those between 25 and 34 years old and increasingly these buyers are picking Korean and European brands over the traditional favorites from Japan or Detroit.
“We’ve seen the domestics slip, but surprisingly the Japanese have been the big losers,” said Anthony Pratt, Director of Forecasting for Polk. “Hyundai and KIA have really done a good job tracking this demographic.” (Read More: Hyundai's US Growing Pains.)
Here is the breakdown of sales by age group this year and how much they’ve changed:
Breakdown of Sales by Age Group
|Age||% Sales||Change Since ‘11|
LOWER MONTHLY PAYMENTS ATTRACTING YOUNG BUYERS
Three factors are driving younger buyers into new car showrooms:
• There has been a steady expansion in auto loans that extend well beyond 6 years. In fact, it’s not uncommon to see auto loans that stretch out over 7 years. (Read More: New Car Buyers Stretching Out Payments.)
• Easier credit means younger buyers have more choices and options when it comes to taking out an auto loan.
• Used car prices remain high, so when someone 18 to 34 years old is in the market to buy, they’re finding the monthly payment is just as low, or even lower, than with a used model.
Add to that the growing number of models priced below $20,000 and it’s clear younger buyers who may not have as much money certainly have more options in showrooms. (Read More: America's Car-Mart Soars on Low-End Sales.)
“We believe the 18- to 34-year-old buyer is coming back right now probably because there are lot of deals to be had, and quite frankly the manufacturers are targeting them right now,” Pratt said.
NOT DRIVING WHAT THEIR PARENTS DRIVE
There’s a well-known axiom in the auto business: Younger buyers often want something far different than what their parents drive.
Remember the baby boomers in in the 70’s buying Toyota and Honda cars because they didn’t want to drive a Chevy or Ford like their parents? That’s now happening with Hyundai and Kia.
Many of the younger buyers are turning to those Korean brands instead of buying a Japanese brand like their parents. In fact, the change in buying patterns since 2007 is striking.
Change in Buying Patterns
This is important news for automakers as once they land the younger buyer, they have a better shot of keeping them and walking them up the ladder of models as they age.
“It’s easier to retain a new buyer than it is to conquest that buyer,” Pratt said.
—By CNBC's Phil LeBeau
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