Deloitte report finds affordability concerns have affected main demographics

The 2021 Global Automotive Consumer Study by Deloitte unveils that as many as 23% of millennial car owners opted to defer car payments in 2020 amid the pandemic recovery. Although just 1 in 10 car owners chose to defer one or more car payments during the year, the rate more than doubles among 18 to 34-year-olds. As well, 55% of future car buyers intend to spend less than initially expected for their vehicle purchase. 

That millennials have chosen to defer payments during the pandemic shouldn’t come as a surprise. Of Americans 18 to 29 years old, 35% say they, or someone else in their household, has lost their job due to COVID-19. That rate falls slightly among 30 to 49-year-olds to 30%, according to Pew Research Center. 

The view of affordability among the millennial generation is markedly different than previous Boomers and Gen Xers. Recent FICO research has shown that 19% of millennial car buyers would prefer to purchase a car on a credit card if possible, even with the very real possibility of higher interest rates. Just 20% would prefer to use a dealer’s financing options while 27% would look to their bank or credit union. More than 1 in 3 – 34% of millennial car shoppers – would prefer to buy a car with cash.

Although the savings rate among Americans has risen sharply in recent months, the number of millennials who are paying cash for cars has been dampened due to uncertainty in the job market. Opting instead for the less desirable financing option keeps their capital freed up in case of job loss.  

Car shoppers intend to spend less on their purchase 

Speaking to the attraction for more affordable vehicles, the Deloitte study discovered that more than half of future car buyers expect to curb their expectations on a new car. 55% say that they plan to spend less than they initially expected on a new car. 

That seems to go against what is actually occurring in the new car market as the average price of a new car rose above $40,000 for the first time ever in December. It comes as SUVs now account for half of vehicles sold in the US, and pickup trucks make up another 20%. These models are notoriously more expensive but desirable due to their versatility. 

Though intending to spend less, car buyers like the savings-savvy millennials that continue to have steady employment haven’t been deterred from buying a car. The study found that only 17% of American car buyers expected to delay their vehicle purchase due to the pandemic, while another 17% accelerated their purchase. 

“People that are in the new car market are somewhat insulated from the downturn experienced by the pandemic,” says Edmunds’ executive director of insights, Jessica Caldwell. “It’s almost like we have two different countries within this country of people who are buying new houses, buying new cars, versus other folks who are perhaps in the service industry and are struggling.”

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