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
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.
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.
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.
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.
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.
The counter point to that is the life expectancy of cars. Back in the “good old days” the average car lasted 7 years, and perhaps 60,000 miles, and it was special when you made 100k, and very very rare when you made 200k. Back in the “good old days”, you got up, and went out and put your key in the ignition, and thought “I sure hope it starts today”. Back in the “good old days” every gas station was a service station because cars needed so much service. You could get a used car cheap and work on it, if you knew how, because they were so finicky that people were always buying new ones every few years.
By contrast, today when we buy a new car, we expect it will take little to no maintenance the first 100k miles, that it will last at least 200k miles, and that it won’t rust out. It never occurs to us that when we go to start it, it might not start; we just take it for granted that it will start. The average age of cars is now nearly twice as old, about 12 years. We don’t buy as often, which means we don’t sell as often, and there are therefore less used cars out there. We can’t work on it ourselves anymore, but we don’t need to.
The problem with the good ole days was that vehicle service schedules were frequently ignored by owners and due to the relative cheapness of repair labor and parts prices, if you abused your vehicle you could get it fixed for not a lot of money. I have a 1967 Imperial Coupe (one owner prior to me) with about 125 K on the clock which means it sat idle for long periods of time it has a 440 cid V8 and a 3 speed torque flite transmission with 4 piston caliper disc brakes on front the engine and trans have never been open but for fluid changes. I replaced the POS Holley carb for an edelbrock and added a stack plate trans cooler – that’s it . Yes, it drinks gas but with heavy duty radials it handles as well as most modern cars and has a top end of about 140. Oh , I forgot I replaced the single exhaust for a dual H pipe with mufflers & resonators. My point is , is that if you do the correct service on a car it will last as long as any other machine absent abuse or human induced catastrophic failure. A modern car with all the electronics and computers could not sit idle for 10 years and be reactivated at relatively low cost if at all. If you look back at auto prices prior to the LBJ induced inflation of the late sixties & early seventies a luxury car could be had for about $1.00 per pound – lower level brands accordingly less. Try working that equation today.
The new safety features in new cars is reason enough to buy new vs used. I would never buy a car without a backup camera.
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.
The car trend about to reverse hard is owning an SUV. When organizations the size of GM and Ford observe a trend, the trend is about to reverse. GM and Ford are reducing or eliminating car production because they think SUV sales will continue forever. They will be at a loss when the few remaining customers want cars. Toyota and Honda will benefit because their lineups include more cars.
Actually the trend of fewer drivers is well under way based on the data Mish posted. The general public doesn’t feel the trend yet because it has taken over 10 years for the old trend to slow and the new one to establish itself.
“gullible people who want to work for free for Uber and Lyft (essentially they pay you with your own car)”
“There’s a sucker born every minute”. P.T. Barnum
Not being able to Drive,,, another skill the young folk lack,,, no wonder they have less value to an employer…
I lived in the big city when I was in graduate school. I had to move out to the suburbs to have a reasonable commute to my first real job. Well that was then. My former employer relocated rather close to my old apartment some years ago. Why did they say? For the young talent. These “kids” are being catered to by the employers as my former employer isn’t the only one.
It would have been nice to have stayed in my graduate student studio apartment for a few more years. Could have saved a lot of money. But back then it was more like you say, today, not so much.
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.
Adjusted for something entirely arbitrary, anything can be anything. Humpty Dumpty style Newspeak is convenient that way.
No one is going to point out the obvious fallacy in my argument? The CPI overstated inflation significantly from 1976 until 1996 or so, when it became a lot more accurate. If you use the GDP Price Deflator, instead of the ridiculous CPI, the cost of my 1976 Honda of $4622 in 1976 would only be $16,202 today, a lot closer to reality. The reason cars seem a lot more expensive today is that they are. Cars have not gone up faster than the CPI, but they have gone up faster than the real inflation.
And, by the way, you can’t have your cake and eat it, too. If you believe that the CPI was accurate from 1976 to 1996, but has understated inflation since 1996, then my 1976 Honda would be worth more like $50,000 today, and cars today are a huge bargain at only $25-30,000, far, far cheaper than when we were young.
How affordable a car is to a young person today vs 40 years ago, can not be estimated in any way at all, by monkeying about with “goods baskets.”
First, young people need a place to live. In a place where there are jobs with a future. Then, they are mandated to buy “insurance” to make sure there are deep pockets available for ambulance chasers. Then, they must pay on student loans. Only after all that, can they even begin to think about a car. And all this on a median salary which has been pretty much stagnant; with all productivity gains stolen by The Fed and regulators, to be redistributed out to idle well connecteds in the form of “asset appreciation,” rather than as increased income to those who did the work to generate the wealth which is being redistributed.
Unless your method for calculating “inflation” capture the difference in costs faced by someone rolling into The Haight and buying a place in ’68, in order to set up shop selling Dead paraphernalia; versus someone attempting the same today; it will never explain why the boomer could afford a VW bus to roll around in stoned and uninsured, while the Z’er can’t dream of affording doing any of that at all. And while The Haight may be an extreme example, the trend is the same in virtually every area in the US with a good supply of available jobs for young people.
I think requiring insurance is very reasonable, for example, but of course, I had an uninsured motorist total my car, which cost me a thousand bucks for the deductible, that I wouldn’t have had to pay if he had insurance. Sure, I could in theory have gotten it back from him, but fat chance of that.
As for the used car market, it used to be that new cars were junk, and after a year or two, they took a lot of tinkering to keep them going, so people traded them quickly, and those that knew how to tinker could get a deal, and could keep them running. Now the cars go and go and go, until they stop, at which point they become to expensive to maintain, and are done.
I do agree that the student loans are a rip off to the young. Once it became true that students couldn’t shed loans in bankruptcy, they became easy to get, and naive students signed up for them in huge amounts, enabling universities to ramp up tuition as rates double the rate of inflation. I could pay my tuition working part time, with no needs for loans. As high as tuition has gotten, no one can do that today.
As far as inflation, though, the car example is a great example of how we can interpret the accuracy of the CPI. There are only three possible interpretations, and each of us can choose which we believe:
In asking yourself which of these you believe, suppose you wen to the dealer, and had two options, a 2019 Honda for $23,720, or a brand new 1976 Honda Accord, fresh off an assembly line. How would you feel about that second choice if the price tag on it was $50,000? $21,132? $16,202? The only one of these that would even make me consider the 1976 version would be if the price tag was $16,202, and even then, I wouldn’t take it.
Now, let me add another data point. I also bought a top of the line Honda Accord in 1988, for about $16,000, but that’s only an approximate number, as I can’t remember the exact price. Based on the CPI, the price today for that car would be $35,153. If the CPI has been low by 3% a year for the last twenty years, as some believe, you have to add another 81%. That would make the price today for the 1988 version a whopping $63,300. Using the GDP calculator, the price would be $29,600, about the same as modern top of the line Accords.
Using the second data point, you again get three options as to which you can believe:
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.
More evolved forms of life, long since figured out how to move about on two legs and wheels. Leaving the lower forms to crawl around on four, like little children 🙂
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.
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.
Get a license, get a job, car payments, insurance, and possibly leaving the nest (paying rent)? Screw all that!
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.
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.
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 ?
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
The welfare checks handed out at the welfare office on Wall Street, are unusually large. Explaining both why the children of those receiving those checks, can drive fancy cars; and why the children of those who are robbed by debasement to pay for them, can not afford cars at all.
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
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.
As a baby boomer, I just bought a compact SUV. It’s small, but a bit higher off the ground for easier entry and exit, as you describe. I opted for a gas car as I don’t want to get into the maintenance issues of batteries, etc. My brother and father both had hybrids a few years back, and both regretted it.
We will do a 3-year lease to have warranty coverage.
I want the simplicity of EV. Even though I have a great independent mechanic just 2 blocks from house who specializes in German cars, I am tired of dealing with fluids. He has told me to buy an EV even though it means zero business for him.
The ideal car for us would be a EV version of an Audi Q1 or Q2.
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:
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.
Well, you forgot to bring up the hard work involved in mining the crypto; you know, burning a lot of electricity for nothing. On the highway back to stone age.
Verifying transactions, is hardly “nothing.” It’s kind of and important function to perform in a monetary and financial system….
Besides, mining Gold isn’t exactly energy neutral, either…. And furthermore, it is the fact that mining Gold is expensive, which ultimately boils down to being energy intensive, which makes Gold a suitable money in the first place. If mining it was free, it wouldn’t be particularly valuable, now would it?
Of course, if one is nothing more than a totalitarian caudillo, or someone dumb enough to fall for their childish nonsense; it is a lot more convenient to just make up some “money” that is almost impossibly expensive for everyone else to mine, but free for Caudillo-San himself. That way, he can just confiscate everyone else’s labor at his arbitrary discretion, simply by debasement. Slavery by the printing press, instead of the whip. Looks prettier that way, for those too dumb and economically illiterate to know any better.
There’s proof of stake cryptos. No mining needed.
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.
“Insurance is a racket”
No kidding! It’s even worse, it’s a racket built on top of another racket. Racket squared. Heck, come to think of it, racket cubed. Or even to the fourth….
The insurance racket is built on top of the ambulance chaser racket. Which serves no other purpose whatsoever, than transferring wealth to John Edwards and similar well connected nothings. So, everyone is forced to fork over to the insurance leeches, just to make sure there is plenty of loot for Edwards to come steal.
And then, the ambulance chaser racket is built on the more general court and legal racket. Which serves no other purpose whatsoever, aside from empowering dead weight to interfere in the lives of others by “deeming,” “finding,” “ruling,” and “determining” that others are “guilty,” “at fault,” “held responsible” blah, blah. All in an utterly arbitrary fashion, of course.
And then, that racket is built on top of a totalitarian government powerful and well funded enough to serve as unrestrained enforcer of all of the above leeches’ arbitrary kleptocratic intrusions.
All of the above has to be kept alive, in ever greater splendor, by the dwindling number of people who still bother doing something productive. For those saps, which of course counts all not-born-into-privilege young people, it’s no wonder they just want to check out. It’s just too bad they don’t have the conviction and cojones to do it in a more effective fashion. Instead of ultimately falling for the same “starving children,” “tanks in the streets,” “system will crash” and “we ‘paid in’ ” nonsense that has worked so well as a tool for bending previous generations over.
Insurance has mostly just kept pace with inflation over the years. I remember 40 years ago a safe driver paid about $250-300, which would be about $1000 today, and a risky driver might pay up to $1000-1500, which would be $4-6000 today. The base rate today seems to be about $1000, about the same, but the high risk rates seem to be less than $4000, so they have become more competitive. I suppose that makes sense because the cars today are safer, so there are probably less bodily injury claims, and a reduction there would affect high risk drivers more than safe drivers.