An important trend is taking shape among millennials – that is, persons born between the early 1980s and early 2000s. It seems as though this sector is less interested in car ownership than their predecessors. Let’s find out how this might affect the car industry including finance rates.
Auto refinance can lower your next car payment. Get a free refinance quote from CARCHEX today.
Causes Of The New Trend
The decline in car ownership among millennials involves many factors. Increased urbanization, for starters, allows city dwellers to get around easier than ever. Ride-sharing services like Lyft and Uber have created a generation that gets rides through a smartphone app. With Uber present in nearly 60 countries, these services have achieved worldwide reach, and they continue to increase in popularity.
The recent recession also may have been a factor for decreased car ownership. However, with the economic recovery, the trend doesn’t seem to be easing. In fact, the average Texan seems to be driving less and less even though the state’s economy is one of the strongest in the nation.
Nationwide, the the number of miles driven annually peaked in 2007, and a rebound has yet to occur. If you look just at the number of young drivers, the decline seems to have started way back in 1983 in terms of percentage of licensed drivers that are teenagers. Many teens say that they just don’t have enough time to get their licenses.
Wide Reaching Impact
If this trend continues, the repercussions could be significant. For example, with reduced demand for cars, the associated demand for tires, parts, and fuel also declines. This also means less tax revenue for highway maintenance. The biggest positive changes might be freeing up space occupied by parked cars and improving environmental conditions. Could car prices see a big drop? For now, it’s still too early to tell.
How About Financing Rates?
If the demand for cars declines sufficiently, there will be a diminished demand for financing, meaning that interest rates will likely fall. However, if the trend leads to fewer lenders in the market, then rates may not change significantly.
Long Term Implications
Even though the demand for cars from millennials seems to be decreasing, Americans are still driving more than ever. Furthermore, if cars see more continuous use, the average lifespan of the vehicles will certainly fall. And for now, ridesharing appears to be more expensive than owning a car. While it’s difficult to draw clear conclusions, one certainty is that the future of the car industry will look much different than what we see today.
Find out today if CARCHEX can lower your car payment. Get a free auto refinance quote now.
Published in CARCHEX Auto Finance Resources by CARCHEX on August 7, 2015