Study: Boomers now No. 1 market for new cars
The 55- to 64-year-old age group has become the cohort most likely to buy a new car, a new study shows, replacing the 35- to 44-year-old age group, who were most likely to buy four years ago.
Last year, Dave Rodham bought two Ford Mustangs — a red one because it looked cool and then a white one with a big V-8 engine because it sounded cool. For Rodham, 63 and retired, those were his 50th and 51st cars.
“I have to have a new car every year-and-a-half to two years,” said Rodham, of Virginia Beach, Va., who said he pays cash for his cars. “After I retired 10 years ago, I didn’t have anything else to do, so I went out and bought new cars.”
For generations, car buying declined as consumers entered their golden years. Now, boomers are refusing to follow their parents’ lead and go quietly into the car-buying night.
The 55- to 64-year-old age group, the oldest of the boomers, has become the cohort most likely to buy a new car, according to a new study by the University of Michigan’s Transportation Research Institute. Graying boomers replaced the 35- to 44- year-old age group, who were most likely to buy four years ago.
The findings show there are plenty of miles left in boomers’ automotive passions and pocketbooks. They also suggest the billions the auto industry spends to try to woo the elusive Generation Y, the children of the boomers, would generate a higher return on investment if targeted at older drivers.
“You shouldn’t be chasing the younger people, you should be looking at the older people,” said Michael Sivak, author of the study. “Baby boomers are trying to extend their youth as long as they can, both in terms of taking care of their bodies and in their expenditures.”
And the recession is extending the working years and peak earnings period of the 76 million Americans who were born from 1946 through 1964 in a post-World War II birth boom.
“People’s nest eggs were decreased, including their retirement portfolios, by the recession,” said Lacey Plache, chief economist for auto researcher Edmunds.com “We can expect these people to be in the workforce longer and, as a result, buying cars longer.”
There’s also a strong psychological reason driving boomers back to the car dealer’s lot year after year: Their cars define them.
“The car was a phenomenon of the 20th Century,” said John Wolkonowicz, a Boston-based automotive historian and a former Ford product planner.
“For people who grew up and lived in the 20th century, the car was freedom, it was status, it was an extension of you, a visible expression of you and your personality. A 20-year-old doesn’t see the car the same way.”
Indeed, young people don’t seem that interested in driving.
Just 79 percent of people between 20 and 24 had a driver’s license in 2011, compared with 92 percent in 1983, according to the Michigan study.
Conversely, the oldest boomers are trooping down to the Department of Motor Vehicles in growing numbers to remain licensed to drive. Almost 93 percent of those age 60 to 64 had a driver’s license in 2011, up from 84 percent in 1983.
That helps explain why consumers age 55 to 64 had the highest rate of vehicle purchases in 2011, while the youngest age groups had the lowest rate. Even consumers age 75 and above bought cars at a higher rate than 25- to 34-year-olds and 18- to 24-year-olds, the Michigan study found.
Automakers have spent billions to come up with youth vehicles that end up selling better to boomers. A decade ago, Honda fielded the boxy Element sport-utility vehicle with clamshell doors and rubber floors that could be hosed out by on-the-go young people. Instead, Honda’s boomer loyalists bought the car until it was discontinued in 2011.
“One of the dirty little secrets of the auto industry is all these cars are positioned in advertising and public relations as something a 25-year-old will buy,” said John Morel, a market researcher for Honda. “But your propensity to buy a car at 25 is roughly a quarter of what it is at age 65. By definition, very few cars sell in high volume to 20-somethings.”
Automakers are rewriting the playbook on marketing to senior citizens. No longer will retirees buy the big, boulevard cruiser and drive it into the grave.
“Boomers have done everything different than previous generations, so why would we expect their retirement to be any different?” said Susan Pacheco, a Ford generational marketing executive.
“Their automotive needs are what we base our product strategy around. If you don’t market to them, it would be a very big mistake.”