Q&A: How will millennials driving less affect car buying and insurance?
Millennials, often defined as people born between the early 1980s and the early 2000s, are redefining car use. While older generations sought to get their driver’s licenses at the first opportunity and have valued their vehicles, millennials are showing apprehension about car ownership.
Instead, they’re embracing ideas like ride-sharing from companies such as Lyft and Uber. While these services are coming under fire from states and facing regulatory battles, their rise is due in no small part to millennials who have little interest in buying cars.
Interestingly, if millennials drive less, car insurance rates could drop for certain vehicles. That's because millennials are the riskiest drivers on the road: They tend to cause the most crashes and claims. They're also attracted to smaller, more affordable vehicles, which then drives up the average premiums for those vehicles due to claims history. Check out Insure.com's annual car insurance comparison study for average rates for hundreds of vehicles.
We asked Dr. Erika Matulich, PhD PCM, a professor of marketing at The University of Tampa in Florida, to help us understand the new trends in car ownership – or lack of it.
Q: There has been a widely reported decline in car ownership and miles driven by millennials. Is this a shift in attitude or simply in spending because of economic reasons?
A: The decline is both a shift in attitude and a reflection of economic pressures on this generation. Certainly a recession, a tight employment market offering lower wages and fewer positions, and skyrocketing fuel and insurance costs play a role. At the same time, millennials have a unique value system and set of attitudes that also contribute to the decline.
Q: Are there other factors behind the decline?
A: Millennials value the environment, and wait for the promise of affordable electric cars, as well as cars that match their technological use along with a need for self-expression. Additionally, many of them are staying at home longer and driving family shared or parent cars.
When moving out of their parent’s home, a preference is for urban environments in walking and biking distance, and a shared living experience with roommates who would potentially also share transportation modes. Car ownership is not part of the “American Dream” for millennials, who would rather spend their money on lifetime experiences.
Finally, with the advent of being able to shop for almost everything online and have it delivered to the door, the ability to telecommute and work from home (or any environment), along with web-based education, reduces the need for transportation for this generation.
Q: Could these trends reverse, and for what reasons?
A: Millennials certainly haven’t abandoned car ownership; they just value ownership less than older generations. As millennials mature, they may revert to a more traditional role of a working parent with a house in the suburbs, which often requires car ownership. At the same time, they will want cars that are technologically advanced and adept, environmentally friendly, and cost effective.
Q: Will the roll-out of autonomous cars speed the process?
A: As long as autonomous cars are cost effective (not only in purchase prices, but also operating/ownership costs) and environmentally friendly, they could speed up the process of car adoption by millennials. However, autonomous cars may speed up car sales overall, as people of any generation may be inclined to replace and older-technology vehicle.
Q: Do you see some kind of collaborative auto ownership becoming the norm for all populations, not just the youngest?
A: Collaborative ownership makes sense for any generation. Why own a nonperforming asset? If asset use can be maximized by fractional ownership or collaborative agreements, everyone wins. Fractional ownership of airplanes and yachts is increasing in popularity, so why not for cars? Americans value convenience, so have been reluctant to share their vehicles, even if it means their car sits in a garage unused. Millennials also value convenience, but are better at sharing, collaborating, and managing time around availability of transportation, such as carpooling.