On a beautiful morning last fall, I dropped my daughter off at daycare and drove to meet my father for an early breakfast before work. As I pulled into the parking lot of the restaurant, I spotted my dad…getting out of a brand new Honda Pilot SUV.
Beyond being jealous of his new purchase (and a little annoyed that more of the inheritance just went out the window), I had to ask “What’s this all about? What was wrong with the old Pilot?” (full disclosure: he traded in a 2012 pilot in favor of a 2016 model.)
“Well, it needed new tires.”
Okay, that wasn’t really the true reason. But this was the second new car purchase my parents had made that fall, with my mother also replacing her vehicle. But if you start taking a look at the demographics and statistics associated with new car purchases, it makes complete sense why my Baby Boomer parents have been out
spending my inheritance purchasing new vehicles.
With children grown and out of the house and smaller mortgages and bills to pay, Baby Boomers are enjoying a little extra time and a lot of extra disposable income. While many banks and credit unions have focused their auto loan marketing efforts on the Millennial age group (often seen as a source of wealth for marketers), that strategy might be somewhat off target. Baby Boomers are the cash cow of the auto industry right now!
Although Millennials are interested in purchasing vehicles, many lack the means to do so. Many Millennials are still living with their parents to save money, there’s $1 trillion in outstanding student debt nationwide, and Millennials are even postponing marriage due to lack of funds. With all of these factors, car buying is falling further down the priority list.
So what’s a marketer to do? Time to recalibrate and shift focus. Consider this:
- 62% of all new cars purchased in the United States are being purchased by Baby Boomers. In 2001, they represented only 39% of new car purchases.
- Since 2001, Millennials registering new cars has fallen – from 24% to 13% of the market.
- Only 25% of new vehicles being purchased are being done by Gen Xers.
Now, I know what you’re thinking: if Baby Boomers have extra disposable income and are out buying new cars, why wouldn’t they just pay cash for a car and avoid all of the hassle of financing?
Simple. One word: retirement.
Okay, two words: retirement savings. As in, it’s also well known that Baby Boomers are the financially least prepared generation for retirement. And they’re the ones retiring right now!!
Think about it this way: if your bank or credit union positions your auto loan product as a way to help Baby Boomers satisfy the craving of purchasing a new vehicle, while also allowing them to keep large chunks of cash in invested, income-producing assets, it’s a win-win for everyone.
Targeting Baby Boomers with auto financing doesn’t mean turning it off for other age groups. But right now, there certainly is a focus on putting younger folks in vehicles and connecting them with affordable auto loans. And that logic may be displaced for now. Time to get after the Boomers…again!
What do you think? Does your bank or credit union actively market to Baby Boomers with auto loan offers? Let us know!