Millennials can be accused of many things, but extravagance isn’t one of them — at least when it comes to buying cars.
A new survey from QuoteWizard found that millennials are choosing lower-priced vehicles than those in other generations, and not just because they tend to have more debt. (Note: QuoteWizard and ValuePenguin are both owned by LendingTree.)
The study examined data from auto insurance quotes for millennial drivers, defined here as those between the ages of 22 and 37. The most popular car among millennial buyers was the Honda Accord, which has a manufacturer’s suggested retail price (MSRP) of $23,720.
The runners up for most popular car among millennials, in order, were:
- Nissan Altima (MSRP of $23,900)
- Honda Civic (MSRP of $19,450)
- Toyota Camry (MSRP of $23,945)
- Hyundai Sonata (MSRP of $22,500)
- Chevrolet Impala (MSRP of $28,020)
- Ford F-150 (MSRP of $28,155)
- Toyota Corolla (MSRP of $18,700)
- Ford Focus (MSRP of $17,950)
- Jeep Grand Cherokee (MSRP of $31,945)
Overall, millennials are gravitating to less costly sedans rather than sport utility vehicles (SUVs) and trucks, which are more popular with older generations, QuoteWizard said. In fact, the study found that the average MSRP of the top five selling cars of 2018 cost, on average, more than $5,000 above the average price for millennials’ top five cars.
The study offered a number of possible reasons why millennials may be spending less on their vehicle choices. Among them:
- Millennials haven’t reached their peak earning potential. Since millennials are typically less established in their careers than older cohorts, they generally make less and have less disposable income. The median adjusted income for households headed by millennials was $69,000 in 2017, compared to $85,800 for Generation X-headed households, and $77,600 for baby boomers, according to the Pew Research Center.
- Millennials are juggling debt. Millennials are saddled with an average of $36,000 in debt and are spending 34% of their monthly income on debt payments, according to a 2018 study by Northwestern Mutual. The biggest sources of that debt are from student loans and credit cards.
- Millennials may have more access to public transportation. Researchers from Rutgers University and the City University of New York found that millennials are happiest living in cities and larger metropolitan areas. Those areas typically have more public transportation options, making cars less of a priority for getting around. According to QuoteWizard, millennials have also “helped give rise to the ‘Super Commuter"—someone who travels more than 90 minutes to get to work.
Many financial experts say it’s a good idea to spend less on cars and other items that depreciate in value, and put more money toward assets that have the potential to grow in value such as a house or an investment account.
If you have other student loans or other debts to pay for, it makes sense to avoid financing an expensive car, since you’ll be adding to your debt load rather than cutting it down. That said, if you do decide to buy a car on credit — whether new or used — make sure your credit score is as high as possible so you qualify for the lowest interest rates.