Putting Members in the Driver’s Seat, Part II: The Auto Industry’s Booming — But for Who?

Originally intended to reach young adults, the Kia Soul has enjoyed surprising success selling to their parents — and grandparents. For 2014, the Soul is all new, retaining its signature shape while picking up an exceptional level of refinement.

Editor’s Note: Winter is Auto Show Season in the Pacific Northwest, with major gatherings planned for Portland and Spokane in the coming weeks. It’s also a great time for credit unions to court members with lower interest rates and friendlier loan terms than dealers or banks can offer. With that in mind, Anthem asked John M. Vincent, a nationally-recognized automotive journalist and a longtime Northwest credit union board member, to share his perspective on the latest trends in the auto industry. Look for more of his stories, photos and videos online at nwcua.org/auto-show.

Story and photos by John M. Vincent

America’s auto industry is booming again. Many manufacturers are reporting record sales, and the overall new-car market is expected to exceed 16 million vehicles in 2014, the highest sales number since 2006. Plants are adding shifts, with 95 new or redesigned models expected to enter the market this year, according to market researcher R.L. Polk & Company.

Who’s buying these cars, and what are they buying? The answer might surprise you.

There’s been an emphasis on getting younger buyers into dealerships and younger borrowers into credit unions, but that’s not where the action is right now. It’s still the baby boomers who are buying cars. Market data from Edmunds.com shows that 40 percent of vehicles sold in 2012 were to buyers in the 55-plus age group, up from 33 percent in 2008. Sales to the 18-34 age group dropped to 11.5 percent in 2012, down from 14 percent in 2008.

Why the shift? Analysts cite many factors, but it really all comes down to this: Many Millennials simply can’t afford new cars – and others just don’t want to bother.

Data from the Federal Reserve shows a sharp decline in both net worth and income for people born since 1982, coupled with a 91-percent increase in student loan debt. At the same time, the lifecycle cost of vehicle ownership — insurance, fuel, purchase price, etc. — continues to outpace the rate of inflation.

Meanwhile, the number of young adults obtaining a driver’s license has dropped to its lowest rate since 1963, according to the Federal Highway Administration. And a Pew Research study shows that Millennials are delaying having children and getting married later – two key factors that often lead to auto sales.

Should marketers simply ignore this market? Absolutely not. For both automakers and credit unions, developing relationships is a critical long-term strategy. The best way to ensure that you’re in the game when members buy their mid- to high-priced fifth car is to have been there for them when they bought their first inexpensive or used car.

The key is being involved in the entire buying process, from research to sale, according to Dick Anderson, the Northwest regional director for CU Direct. “The credit union does want the financing and can do the financing,” Anderson says, but “you need to be at the point of sale.”

Given the statistical data, you’d think that the auto industry’s emphasis on building cars that appeal to younger buyers would hurt sales. But surprisingly, that’s not the case. Many of the vehicles designed for youthful buyers also have been successful with older consumers. One great example: the Kia Soul.

Despite being hyped by Hip-hop hamsters and sporting features like USB connectivity and speakers that pulse with the music, the Soul is now seeing especially strong sales to baby boomers and even seniors. Sales for the Soul topped 118,000 units in the 2013 calendar year.

With a wider array of powertrains and trim levels than any other sedan, the 2014 Volkswagen Jetta appeals to customers young and old. Pricing starts at just $16,720.

What else are boomers buying? Trucks. Lots of trucks.

Of the 15.5 million cars sold in the U.S. last year, more than 1.8 million were pickup trucks. Ford dominates this segment of the market with its efficient, EcoBoost-powered F-150, but both GM and Chrysler’s Ram division have impressive new models.

High-end, four-door pickups are proving especially popular, as non-business buyers swap their full-size SUVs for luxurious trucks. Models like Ford’s King Ranch, Ram’s Laramie Longhorn and Chevy’s new High Country contribute high profit margins to carmakers. It’s easy to outfit even a light-duty truck with options that move it into the $50,000-$60,000 price range.

What aren’t boomers buying? American sedans were once the industry’s bread and butter, but not a single sedan from America’s big three automakers was among theTop 10 models sold in 2013.

The Toyota Camry was third on the Top 10 list, followed by the Honda Accord. The Honda Civic, Nissan Altima and Toyota Corolla also were in the Top 10. But what’s interesting is that while all five of the “foreign” sedans on the sales list are built in the U.S., the first “American” sedan on the list — the Ford Fusion at No. 11 — was designed in Europe, and many Fusions are built in Mexico for the U.S market.

The strength of Asian automakers is even more pronounced in the Northwest, where Subaru, Kia and Hyundai all enjoy strong sales.

“Putting Members in the Driver’s Seat” is a special package of five stories and more than 20 photos that credit unions can use to entertain and educate their members during this key car-buying season and draw attention to the lower interest rates and better loan terms that only credit unions can offer. Watch for John M. Vincent’s stories in Anthem throughout the month of January, and look for lots of downloadable content here.

 

Questions? Contact Gary Stein: 503.350.2216, gstein@nwcua.org.

Posted in Marketing & Communications.