Automakers are turning to buyers like 64-year-old Martin Friedman for the same reason Willie Sutton robbed banks.
That’s where the money is.
Friedman, who retired three years ago, recently leased a 2012 Cadillac SRX. He’s happy because he’s driving a comfortable new luxury vehicle. His dealership is happy because, God-willing, Friedman will be back in 24 months when his lease ends to get another car.
Baby boomers’ retirement savings may have taken a hit during the financial crisis. Their inheritances may have shrunk as their parents may be living longer and in need of expensive care. But they’re buying new cars like never before.
Those age 50 and older are buying more than three of every five new vehicles sold, or about 62 percent, according to a new study from J.D. Power and AARP. That’s up from 39 percent in 2001 when Power began tracking the data.
For the Detroit Three, boomers now account for 67 percent of all sales.
“The amazing thing is the retirees. They’re coming in waves,” said Dan Frost, owner of Cadillac of Novi and Chrysler-Jeep-Dodge-Ram dealerships in Southfield and Taylor, Mich.
“They used to be cash buyers. Now we’re getting them into leases so they come back in a few years.”
The flip side of the research: Those between 18 and 34 make up just 13 percent of the market, down from 24 percent in 2001.
“Boomers can afford to buy new vehicles. Millennials cannot. The numbers don’t lie,” said Mark Bradbury, director of integrated marketing at AARP Media.
Demographers define baby boomers as those born between 1946 and 1964, and generally as the crush of children born post-World War II. Millennials are the generation born anytime after the late 1970s.
The research raises the question of whether automakers’ vigorous efforts to reach younger buyers through social media or targeted reality shows, such as Ford’s “Escape Routes,” are generating much return. There are older consumers spending significant time on social media and watching shows aimed at their children.
But until the incomes of more millennials stabilize and grow, the question will persist.
“You can’t build any loyalty among people who are not paying attention,” said AARP’s Bradbury.
To be sure, Americans older than 50 already make up a larger percentage of the population, about 42 percent, up from 37 percent in 2000, census data show. But from 2000-2010, the over-50 crowd’s new vehicle purchasing increased at a much faster clip than the percentage population increase in that age group, making their purchasing power disproportionately stronger.
Conversely, 18- to 34-year-olds are much less likely to buy a new car, though their portion of the population has remained steady — 23.2 percent in 2010 vs. 23.8 percent in 2000.
Charles Ballard, Michigan State University economist, said “a substantial portion of it has to be a result of income shifts … The Great Recession has visited a lot of pain upon those who are early in their careers.”
AARP’s Bradbury said the median income of those 50 and older is $67,537 compared with $55,856 for the 18-to-34 demographic.
Boomers on average have investments that are worth $107,833, roughly four times the $23,490 value of a millennial’s portfolio.
“The average price of a new vehicle is slightly over $30,000. We tend to forget that,” said Tom Libby, senior automotive analyst with R.L. Polk in Southfield. “For a 22-year-old, that’s a lot of money.”
Source: MCT Information Services