Topic: industry insights
Our Director of Automotive Industry and Economic Analysis, George Augustaitis, provides insight into how forgiveness of student loans could impact vehicle sales in the US.
Debt continues to increase while wages lag, and many Americans struggle to purchase a new car. In fact, affordability represents the most severe headwind causing the decline in vehicle sales, which are down 2.0% calendar year to date (CYTD) 2019.
A recent survey from Bankrate finds that 58% of Millennials and 56% of all Americans lose sleep over money troubles. Today, 40% of Millennials earn at least half their income from a side hustle. Millennials are the largest living adult generation as of 2019, and they represent a key demographic in the success of the new and certified pre-owned (CPO) vehicle market. However, an increasing number of Millennials indicate that cost pushes them away from purchasing a new vehicle. Knowing this, increasing Millennial disposable income would lead to a rise in the new-vehicle market.
For Millennials, student loans represent the primary reason for their low disposable income. An estimated 44.7 million people in the US have student debt, which amounts to 1 in 4 Americans. With the estimated student debt at $1.49 trillion and the average monthly payment at $393, the increasing amount of student debt shapes affordability significantly more than wages, housing costs, and the rising price of vehicles.