Industry News: GM Economist: Prices Are Making Young People Not Buy New Cars

[William Maley]

William Maley

Staff Writer - CheersandGears.com

August 7, 2013

Yesterday at at the Center for Automotive Research’s Management Briefing Seminars, General Motors' Chief Economist Mustafa Mohatarem told attendees that the reason young people aren't buying cars because they're not interested. It's more to do with economic reasons.

Mohatarem downplayed the reason that young kids are more interested in the internet and what's the latest hot thing in tech, and pushed the rising costs of cars, repairs, and insurance as some of the reasons why young people aren't buying vehicles.

“I don’t see any evidence that the young people are losing interest in cars," Mohatarem said.

He says the biggest problem facing young people buying cars is they are having a challenging time finding jobs. Also, high student loan debt are causing many to skip buying a car.

“Buying a car is less attainable for the young, but that quickly changes as they get older," he said.

Source: The Detroit News

William Maley is a staff writer for Cheers & Gears. He can be reached at [email protected] or you can follow him on twitter at @realmudmonster.

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[regfootball]

younger folks have no money to pay for living expenses, pay off student loans, anything. Why would they have money for cars?

[frogger]

Cost of living, population shifting to urban centers, interest in smartphones, carbon footprints etc all contributing to this.

[G. David Felt]

That is not seen around here except in the city. Greater Seattle area is very rural so a car is a requirement. I would say this really depends on where you live.

[Drew Dowdell]

but that is the point dfelt, a greater number of people living in cities these days than ever before.

[G. David Felt]

Seattle has seen it's population decline and I believe that is due to the lack of quality housing, there is a huge building boom going on and it could change later this year once things finish up but for now the rural region is where peeps are at so car sales are pretty solid here.

[loki]

i agree with reg. generally. are young people... under 25? as in maybe just out of college, maybe not a great amount of work experience, and trying to pay off other things they can't live w/o and "can't live w/o"....

[Robert Hall]

i agree with reg. generally. are young people... under 25? as in maybe just out of college, maybe not a great amount of work experience, and trying to pay off other things they can't live w/o and "can't live w/o"....

Yes, saddled w/ student loans and the worst job market for recent grads in...decades? I remember 1992 when I graduated from college being considered a bad market...part of why I decided to go to grad school back then.

[daves87rs]

I see quite a few young people who can barely afford a beater, let alone everything else...

And it's not just the young people....I really wonder how people in MI can afford both the car payment and the car insurance together.

I've watched mine double in the last few years....and I get all the discounts too! I'm waiting to see if they drop our rates here some, as I have no problem with the car payment, even repairs and such, but the insurance scares me.....

My neighbor just got a new Focus, and his payment is 196 bucks a month, and his car insurance is 375 bucks a month. And he gets the discounts too....and is older than me!

No wonder no one has insurance around here...

[FAPTurbo]

I don't buy his 'economic,' argument. I think he's saying that, only because it's a slightly easier pill for him and other auto-industry stakeholders to swallow, when the real reason IS because youth aren't interested in cars.

Investments in cycling routes, mass transit and dense, 'town-square' development models are all starting to make car ownership a redundancy. In some cities, like mine, it's already happen(ed)ing.

Cars used to be aspirational because they were a ticket to freedom, aka, keeping in touch with friends. With instant communication via smartphones, the aspirational quality becomes a moot point.

Edited August 8, 2013 by Señor Ding Dong

[Drew Dowdell]

Another possibility is that cars that interest young people are too out of reach for them and the ones that are in reach are too blah for them to bother. If my choice was between a Spark or Versa Note or Yaris.....

I'd rather walk.

[G. David Felt]

I don't buy his 'economic,' argument. I think he's saying that, only because it's a slightly easier pill for him and other auto-industry stakeholders to swallow, when the real reason IS because youth aren't interested in cars.

Investments in cycling routes, mass transit and dense, 'town-square' development models are all starting to make car ownership a redundancy. In some cities, like mine, it's already happen(ed)ing.

Cars used to be aspirational because they were a ticket to freedom, aka, keeping in touch with friends. With instant communication via smartphones, the aspirational quality becomes a moot point.

While that is fine for those that want to live in Vancouver, for those of us that do not like living like a sardine it is hell to get in and out of your city. Living just south of you, I would not think twice about heading north to shop and enjoy the parks of Vancouver. Yet with limited parking, congested streets and a tough time getting in and out of the general area if you do not already live there, the desire to turn the city into a walk / bike city does not work for those not living in it.

Seattle has been drinking the stupid cool-aid of the Cascade Bike club and take away street parking and street lanes to convert them to bikes and yet bike riders seem to still not want to follow the rules as if the rules of the road to bikes is a double standard. Bike riding is fine for those living in the downtown city and they do need them to be separate from the cars on the road as well as the walkers on the sidewalk. Yet they also need to charge these bike riders and make sure they have a license and know how to handle their bike.

Back on subject, I agree with Drew that entry level auto's do NOT spark any passion for youth to want to own. At the same time the youth of today have become more of an entitlement crowd and do not seem to want to bother to learn how to repair or take care of anything. Disposable society is what I see today's youth being.

My first auto was my dads clean but well used 76 Chevy Luv truck Series 5. Cost my dad $1675.00 new, I spent another $1K restoring it to like new condition. This included rebuilding the engine, transmission and differential on top of a new dash, interior and paint job. By the time I was done, it took care of me very well till I sold it in 89 $3500 to a lady that still has it today. Needs major work, but she still drives it. I took the time to learn to fix / repair things.

The drive to learn, repair/fix and satisfaction of ownership / pride in what I had is what is missing from the Disposable youth of today IMHO.

[riviera74]

I agree with the GM economist for this reason: the median price of a new car is just above $30K. If automakers were to cut that by $7500 to $10,000 then younger buyers will show up in droves. Given that the average age of a car is now 11 years old, there should be a massive push by automakers to push prices down so that young people can buy used cars already exchanged for new cars at lower used car prices. Loosening credit standards help, but new cars could stand a price cut STAT.

[Robert Hall]

I suppose the only way they can cut that median price is buy selling a lot more subcompact and compact appliances, since that is what the sub-30k model mix primarily is, along w/ some midsizers.

[Intrepidation]

I believe its both a lack of interest in cars, especially the "affordable" ones, and an issue of money. The US economy is still in the $h!ter, if it weren't I certainly be working where I am right now.

Cars are expensive to not only buy, but maintain.

[G. David Felt]

If the GOV did not require all the stupid Nanny devices and car companies had a reasonable 12-15K mini pickup truck, you would find plenty of buyers. The luxury of owning a car is a privilege one earns not a right and yet many think like cell phones and internet that they have a right to own one. Pricing has gotten crazy out of control.

[Blake Noble]

I like how this discussion always completely ignores the "rural" part of the equation, as well as the "used car" part of the equation. Or how about the whole "Mommy and Daddy buying Junior a car to go to college in or go to work in because he has no credit" part of the equation?

If new car sales (especially new cars sold in large urban areas) are the only thing that equals "the youth's interest in cars," then ... well, yeah. I'll just let stupid speak for itself on that one.

No one bothers to mention that this chicken little bull$h! mostly applies to new car sales where "expert industry analysts" are too goddamn stupid to read the fine print and carry the one in an equation. Someone shut these morons up, please. If I read another "Wah, wah, wah, kids hate cars!" article I'm going to puke blood. The discussion never changes. We know that new cars are outrageously priced if you want something that hasn't been fashioned out of two-by-fours and tin cans. We know insurance on a new car will cost you a kidney and ninety-nine cents after the insurance company is finished bending you over a barrel. So what? Better yet, what's the solution?

Just for the record, I live in a rural town with yuppies and a liberal arts college. As a result, we have bike paths in town. In fact, we gave up the chance to have a nice, new grocery store to have them. We gave up the chance to have an alternative to the sin of Wal-Mart. No one uses them. No one. We also have one taxi company with a hodge-podge fleet of cars that includes a Buick Century and a Cadillac Deville. No one calls them, either, and I don't think it's because they have an odd taste in taxis.

Edited August 9, 2013 by black-knight

[regfootball]

where i sold vehicles, people would come in looking for their kid's first car, or college students needed a rig just to get around.

A lot of people think it's still the days of thousand dollar beaters.

the beaters, most of em that you can halfways trust are more like 3! nowadays with used its almost like you gotta spend 5 to get entry level.

the cost of entry for beaters is as much or more of a barrier to new drivers than the rising costs of new, although they are a bit related.

[Blake Noble]

where i sold vehicles, people would come in looking for their kid's first car, or college students needed a rig just to get around.

A lot of people think it's still the days of thousand dollar beaters.

the beaters, most of em that you can halfways trust are more like 3! nowadays with used its almost like you gotta spend 5 to get entry level.

the cost of entry for beaters is as much or more of a barrier to new drivers than the rising costs of new, although they are a bit related.

I don't mean to be a complete douche here, but I'm not buying this either.

For example, I've driven a good handful of XJ Cherokees that cost double what I paid for mine (in other words, we're punching that three-grand mark you mentioned smack dab on the forehead) that needed just as much reconditioning with fewer miles and weren't any more trustworthy. Inexpensive cars are out there if you know how to look, and that really isn't difficult.

Edited August 9, 2013 by black-knight

[Drew Dowdell]

I picked up my car for $2300.

[G. David Felt]

Yet most kids and their parents have grown up with the disposable attitude and are clueless about what to look for in a used auto. They also seem to not be aware that you can request a compression test on the engine to make sure it is solid just like having an inspection on the whole auto.

As has been stated, if you are willing to do a little research and learn what to look for, you can find a reliable beater, but then many feel entitled to the best and would not accept the beater even when told to look at it as a tool for college and then move onto your first new car once you have a steady job and income.

[Soku47]

Eh no, we have not lost interest in cars (at least not me). Though I moved on to bikes, I hear alot of my friends complaining about how hard it isto find a stylish affordable vehicle that returns a very decent gas milage. I pointed them towards a Prius.

[Drew Dowdell]

... as a joke?

What is stylish about a Pruis... they're not even all that affordable.

[loki]

what is classified as very decent? city / hwy...

[Robert Hall]

what is classified as very decent? city / hwy...

No idea..depends on the individual and their budget...16/18 is decent for me, as that is what I've been used to for ages....

[Blake Noble]

I pointed them towards a Prius.

And I'll point you to ...

I really don't mean to be a complete a-hole, but ... seriously, though, a Prius? You can't be much older than I am, dude, and I wouldn't wish that sort of punishment on anyone.

Edited September 1, 2013 by black-knight

[regfootball]

... as a joke?

What is stylish about a Pruis... they're not even all that affordable.

I read today, Prius is top selling car in CA. There at least they consider it affordable because of the fuel savings.

[Soulwatcher]

Are you freaking kidding me it took a Economist to for GM to realize the price of a new car is too high? Your going to spend $20k on a shoe horn style car and if you want a SUV your talking $35k+. Most of the high paying jobs in America went over sea's, most people don't have that kind of money today. Three months ago I read that 80% of student loans were in default and how are young people going to buy a car when they can't even afford to pay their student loan?

Greg

P.S. My car is 8 years old and I will be driving it until the wheels fall off, there is no way I want another car payment!

[G. David Felt]

High schools need to bring back auto-shop so that kids can learn how to wrench on a auto. There are many excellent options for a fun first time auto, yet the current High School crowd is very much part of the Entitlement problem we have. They do not want to work very hard for something nice and they seem to be to out of shape to actually do hard work.

[OhioTom76]

Student loans and college tuition these days are exponentially higher than the ever were when I was in school. Not to mention the starting price on a lot of these cars have gone up as well. You used to be able to get a decent new car for under $20k, now a lot of these same model cars are starting at like $25k+ for just a bare bones model.

[G. David Felt]

The push to have higher minimum wage jobs is not going to help but hinder people spending money.

If the idiots that feel minimum wage should be higher only looked at the bigger picture they would realize that McDonalds, Denny's etc were never meant to be full time life long jobs. It was a job to get you going while you looked for something better, got educated or showed you could work hard to go into a assistant mgmt job.

These are starter jobs and we need as low as possible minimum wage to get kids to learn how to work and work the fast food jobs.

If someone wants to be a burger flipper for life that is fine then they will have to accept a lower standard of living and not expect to ever own a house or nice new car.