Loan Data Discredits View That Millennials Do Not Want Cars
Millennials are less interested than older folks in owning their own cars, right?
Maybe not, according to auto loan data showing young Americans are increasingly active in the car buying market.
Despite the belief that millennials could become an increasingly smaller segment of the total car-buying population, the share of auto loan requests from millennials has been increasing in recent years, according to data from online loan marketplace LendingTree. The data show that the share of millennial auto loan requests has climbed from roughly 27 percent in early 2013 to about 34 percent in 2016, suggesting a return of younger buyers to the car market.
LendingTree analyzed auto loan requests for consumers 34 years and under in the past 12 months, along with requests from the total population of auto loan seekers.
Approximately 53.6 percent of millennial auto loan requests in the past 12 months were for new vehicles and 46.4 percent were for used vehicles. For borrowers 35 years and older, 55.8 percent of requests were for the purchase of new vehicles and 44.2 percent for used, suggesting millennials are slightly less likely to finance the purchase a new vehicle compared to borrowers 35 years and older.
On average, 33 percent of all auto loan requests through LendingTree come from applicants under 35 years old. Nationally, their auto loans average $14,825.34, compared to $17,938.74 for applicants aged 35 years and older.
“With employment among millennials improving, coupled with lower interest rates and low gas prices, the share of millennial auto loan requests is on the rise,” said Doug Lebda, founder and CEO of LendingTree. “Although the share of millennial auto loan requests is relatively lower in densely populated urban areas, the auto market appears to be enticing aging millennials.”
Millennials in Memphis, Milwaukee and St. Louis are seeking auto loans more often than their counterparts in any of the nation’s top 50 cities, according LendingTree.
The perception that millennials may be less interested that previous generation in car ownership stems in part from reports that a healthy share of them have shunned getting a driver’s license. In 2010, 26 percent of millennials did not have a driver’s license, which was up five percentage points from 2000, the Federal Highway Administration reported.
But the trend of fewer licenses holds true for just about every age group, according to a January report by University of Michigan researchers.
In a January report examining changes in driver licensure in the U.S. from 1983 to 2014, Michael Sivak and Brandon Schoettle of the U-M Transportation Research Institute found a continuous decrease in the percentage of those under age 45 with a license. Even the proportion of Americans ages 45-69 with driver’s licenses have declined overall since 2008, following a 25-year rise.
The study reinforces previous findings by Sivak and Schoettle that showed that much lower proportions of teens and twentysomethings today have licenses compared to their counterparts in the 1980s.
About 87 percent of 19-year-olds in 1983 had their licenses, but more than 30 years later, that percentage had dropped to 69 percent. Other teen driving groups have also declined: 18-year-olds fell from 80 percent in 1983 to 60 percent in 2014, 17-year-olds decreased from 69 percent to 45 percent, and 16-year-olds plummeted from 46 percent to 24 percent.
Drivers in their 20s, 30s and 40s also saw their ranks fall as a percentage of their age group population since 1983—down about 13 percentage points for those in their 20s, more than eight percentage points for thirtysomethings and nearly three percentage points for those in their 40s.
However, for those in their late 50s and older, the proportion of those with licenses is up about 12 percentage points since 1983—although down more than two percentage points since 2008. The only age group to show a slight increase since 2008 is the 70-and-older crowd.
“Overall, the future evolution of these changes will have potentially major implications for future transportation and its consequences,” Sivak said. “Specifically, licensing changes will likely affect the future amount and nature of transportation, transportation mode selected, vehicles purchased, the safety of travel and the environmental consequences of travel.”
The uptick in auto loans could be a signal that millennials’ credit scores are on the rise. A September report by NerdWallet, a personal finance website, found that millennials, many of whom are saddled with college debt, have the lowest average credit score of any generation. The average millennial credit score was 625, and 28 percent of them are ranked below 579, said NerdWallet. In the world of credit scores, anything above 660 (out of 850) is considered good.
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