Lacy Plache

After years of lackluster performance, car buyers aged 18 to 34 bought relatively more cars than older buyers in 2012, gaining share even as the overall market grew 13 percent. But the pace of sales by these Millennials slowed again in 2013, reversing nearly all 2012 share gains. A slowdown in new jobs for young adults, while the job market for older workers expanded, contributed to the turn around. Plus, the weaker labor market, combined with higher prices and tight supply in the housing market, meant many fewer Millennials formed new households this year, minimizing another key factor from 2012’s car sales growth. Meanwhile, wealth effects from a strong stock market and rising home values — a key growth driver for the market overall — likely contributed less to motivating new car purchases by Millennials than by older buyers.

From 2007 to 2011, the share of sales to car buyers aged 18 to 34 fell nearly 30 percent. Then, when many industry observers verged on writing off this generation as uninterested in cars and driving, the economic tide turned in 2012 and Millennials flocked to buy new cars, recovering over a quarter of their share losses and doing so in a rapidly expanding auto sales market. This surge was short-lived, however. In the first eight months of 2013, the share of new car sales to Millennials dipped almost to 2011 levels. Although the breakdown of sales by income among Millennials remained fairly stable, Millennial buyers retreated at all income levels, with higher-earning households posting the largest share losses.