How millennials are reshaping car buying

The American love affair with cars isn't dead—it's just being reshaped by millennials.

Often saddled with debt, young shoppers are looking for smaller, cheaper vehicles, according to new research by AutoTrader. They're also far more likely to do their research online, often with their smartphones.

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"You hear a lot that this generation doesn't care about cars," Isabelle Helms, AutoTrader's vice president of research, said during an appearance at an Automotive Press Association event in Detroit. "[But] they do care about cars."

Millennials' delay in purchasing vehicles reflects other things they're doing later in life, such as buying a home and getting married, Helms said.

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Regardless of millennials' slow entry into the market, automakers need to pay attention to the generation's needs, defined by AutoTrader as 18 to 34 years old. Although they currently only make up about 12 percent of the U.S. new car sales, millennials will account for 40 percent of new car purchases by 2020, Helms said.

The set of wheels they want

According to AutoTrader's study, which interviewed 1,900 new and used car shoppers, millennials are "big on small" vehicles, which tend to be more affordable and easier to operate in the urban settings where many of them live. Their desire for more fuel-efficient, environmentally friendly vehicles also sparks an interest in alternative-powered vehicles, though they generally can't afford them.

Price is a big factor in millennials' purchasing decisions, influenced by economic realities. The generation faces higher levels of unemployment, lower pay and the likelihood of greater college debts.

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They're also more likely to live in cities and may be somewhat less interested in owning a car—at least for now. Research suggests that as they begin to age and start families, in many cases moving back to the suburbs, their tastes shift to reflect those of Gen-Xers and boomers.

That suggests they'll want bigger, more powerful and luxurious vehicles when they can afford to spend more.

'Mobile rules'

Going into the car buying process, millennials are notably less likely to have any idea what sort of vehicle they want. But by the time they walk into a showroom, they're far more likely to have a specific model and brand in mind

That's due, in part, to the way they conduct research.

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A full 95 percent of millennials said they went online during at least some part of the buying process, compared with just 79 percent of overall respondents.

Auto sales top?
Auto sales top?

The study also found that "mobile rules." Helms said that half of all millennials rely on their smartphones during the buying process, though the trend is spreading to older generationsl.

Still, social media websites such as Facebook have a limited impact on the process of choosing a new car. The study found that only 5 percent of millennials are influenced in their choice of a car by what they find on social media. For U.S. shoppers overall, it was a mere 1 percent.

By CNBC Contributor Paul A. Eisenstein. Follow him on Twitter @DetroitBureau or at