Graduate. Get a job. Buy a car. These orderly rites of passage for the class of 2014 are still the norm, but with a couple of new realities.
The degree could be a diploma or a certificate, the jobs may be a couple of part-time stints stitched together and the post-secondary debt is likely higher. But the one constant is that a car is still a necessity for many millennials.
Another reality is that those young people may be buying a new car for reasons much different than instant gratification. They're a practical lot who do their research by chatting with friends, poring over online reviews and blogs and eventually walking into dealerships to have a conversation with a finance manager or salesperson.
This is a new breed of buyer, as a 2013 Harris/Decima poll indicated. Younger buyers – ages 18 to 34 – have "different attitudes, brand perceptions and buying preferences than their predecessors," the poll reported. What's different, the study suggests, is the post-2008 economy has kept younger buyers out of the market, a trend predicted for the next couple of years.
Daniel Kwagbenu is bucking the trend, but not without some trepidation. He's been pondering a purchase since January; one of his New Year's resolutions was to buy a car.
But he's torn by indecision. New or used? Domestic or import? Dealership or private purchase? What can he afford?
"It is a big decision," says Kwagbenu, who just graduated from SAIT Polytechnic in Calgary with a business management diploma.
He's leaning towards buying used because of the depreciation factor but, he says, "If I can get a finance deal with an attractive interest rate that I can stomach, that could win me over. The new cars have good incentives right now."
Incentives are also a motivator for Missy Chareka, a Mount Royal political science student in her twenties who also just graduated. She's been thinking about the big purchase for a year.
Both students have owned cars before – Chareka's was a gift from her parents when she was 18, but Kwagbenu's was a hasty purchase he got burned on. "I didn't do my research," he says about the transaction, which left him in a legal wrangle with the seller.
Chareka says she'll buy a new Nissan, because a friend works for a local Nissan dealer. She also likes the brand's safety and reliability record, fuel economy – and those friendly payment options. "It makes more sense to look at new," says Chareka, citing niceties such as no payments for six months, coupled with Nissan's finance programs for students.
Chareka disagrees with the popular notion that style is the No. 1 priority for most car-buyers. For her, it's about value and price. "Price is a significant factor because I carry a significant amount of student debt. I wouldn't want to get a car and then be under more financial strain."
Kwagbenu, on the other hand, has his eye on style. He's considering a used Altima, or a Ford Fusion if he decides to go the new car route. "My career is in sales, and the image you portray says you're successful to your clients."
Tony Dilawri sees a lot of young buyers as pragmatic as Chareka.
"What we're seeing is a lot practical purchases right out of university: Hyundais, Hondas and Minis," says Dilawri, whose Dilawri Group of Companies owns 46 dealerships with 29 brands across Canada.
Navroz Jassani, general manager at Calgary's T & T Honda, sees the same kind of buyers at his dealership. "(These students) are looking for something that is not going to be a money pit. Affordability is the key factor," he says. There's less consensus on buying new versus used.
These two students also represent only half of the buyers of this age group who purchase their cars independently. Jassani and Dilawri say parents are still gifting graduates with either a new or used car. Safety and reliability are usually the parents' criteria, "whereas looking cool is often the student's primary focus," says Jassani.
Many young buyers come in looking to spend around $10,000. It's possible to find something in a private sale, but that "sweet spot" price is unrealistic for most dealers. Jassani says a rigorous dealership certification program can drive the price up to $14,000.
"Then, you might as well buy new, because you're looking at $300 to $400 in monthly payments," says Jassani. "That's the decision the student or the parent needs to make at that point."
There are no public statistics in Canada on brand preferences for young buyers. In the United States, pollsters have noted a shift toward Korean and European brands.
In the end, says Dilawri, whatever you spend, you've got to like getting into the car you've chosen. "Like anything, it's hopes and desires versus reality. What you settle for first is not your dream, but it's a start," says Dilawri.
Car Buying Resources
According to a 2013 J.D. Power study, American buyers on average did 19 hours of research before buying a car, with 11.4 hours (60 per cent) spent online. They visited 1.3 dealerships before buying a vehicle, as opposed to 4.1 in 2006. Here are some helpful websites:
Consumerreports.org: Reviews and info on the best financing options.
Unhaggle.com: Discover what dealers pay wholesale for a car.
Carcostcanada.com: Much like unhaggle.com, it also offers wholesale price reports.
Canadianblackbook.com: Used-car guidelines on the average asking price of many models.
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