Upshots for the industry

Analysis introduction:

Upon close examination, data from the University of Michigan student survey highlighted varying sentiments that future car buyers hold. Using information gathered about each students' preferences, and motives for vehicle use, we were able to understand how the students would be likely to behave in a showroom.

Certain characteristics of a student explained why they may prefer a mobility choice. The main distinguishing characteristics were the student's gender and we also found that if a student had a dream car they aspire to own one day, or came from an urban or rural area, their purchase intent may vary.

Students with different backgrounds and characteristics often had different vehicle preferences and ideas about how vehicles fit into their lives. For example, some students only want a vehicle to transport them from point A to point B, while others view their driving as sporty and adventurous. Some students feel owning a car has a social component, and others feel it has no bearing on their status. How students felt in these areas often explained the varying commitment to purchasing a vehicle.

As indicated in the results page, the most noteworthy results of the student survey followed three narratives. First, students who already have a dream car they aspire to own one day have a strong likelihood to purchase a new vehicle, compared to their less aspirational peers. Second, male students demonstrated a higher commitment to purchasing a vehicle, while their female counterparts had less cohesive plans and were more ambivalent about their future mobility solutions. Third, students who hail from rural hometowns have a clear preference for used cars above all other purchasing plans, which stands out from their urban and suburban peers.

But the survey's results did more than confirm current industry trends. Automotive news is filled with chatter about autonomous vehicles, ride sharing, and new forms of transportation but the survey results indicate that students still predominantly plan on purchasing new and used vehicles for their personal mobility needs. This may mean people will be driving their own cars for much longer than some reports suggest, and that investment in the space may be premature and speculative.

To understand why these patterns appeared, we took a deeper look at motives for vehicle use, and industry trends that may explain what we observed.

Dreamers

Our survey found a significant link between students who aspire to own a dream car and planning to purchase a new car. In today's automotive landscape we see manufacturers acknowledging this sentiment by producing 'halo cars.' For example, a brand like Acura or Audi, which makes most of its money from midsize crossovers like the RDX and Q5, will use a halo car like the NSX and R8 as a marketing tool. By strategically placing the products in movies like Iron Man and Fast and Furious, automakers seek to evoke a dream car aura with these performance cars to draw customers into dealerships where they may find similarities in the more popular cars. Since most students identified dream cars as performance oriented, standout styling, and cutting edge tech, it's no surprise the halo cars also include newest performance hybrid systems, mid-engine configurations, and stunning looks. New cars offer better technology and more dashing looks than used cars, and the ideas that draw students to their dream cars also draw them to new cars as opposed to used cars.

The survey data also offers clues as to why buyers may choose a new vehicle or used vehicle. Social values among other motives for vehicle use vary across the population with significant differences between male and female students and urban, suburban, and rural students. Understanding where a student's motives for vehicle use lie is a strong clue for understanding which mobility solution they may choose after college.

Battle of the sexes

Males and females have different preferences across most discretionary spending categories. It's no different when it comes to transportation. A few years ago when a news story broke about how women dominate the car-buying process, the auto industry realized they needed to adjust their focus. Women often face biases in male dominated dealerships, and tend to enjoy cars a bit less than males. To adjust, automakers began to make family-oriented offerings a bit more family friendly, and emphasized features of vehicles that have historically been more important to females, like safety and interior space. The market reflected its approval of the pivot in the rapidly rising popularity of SUVs and crossovers.

[Social status from ownership-> more likely to purchase] We found that students were polarized on the social status of buying a new car. Students expressed that vehicle ownership is an important social value, or that it bears no relevance to their social values in a markedly bimodal way. The students who felt it important were more likely to have plans to purchase a new car. Further, male students are more likely to hold this social belief and which may explain their significant preference for new vehicles, and higher overall commitment to purchase. Our data also indicates that males view the social status associated with buying a new car as important to themselves, rather than for external validation.

Town & Country

Just like how male and female students have distinct heuristics for cars in their minds, cars have different use cases in urban, suburban, and rural areas. It's easy to see why small cars are popular in densely populated urban areas and trucks and SUVs are more popular in rural areas just by observing the landscape. However, the survey results indicated that students from rural areas will have a much stronger preference for used cars. Understanding why this is the case comes down to the different ways vehicles are used in the respective regions.

In a few urban areas, cars are an afterthought as a means of personal transportation, and traffic and expensive parking make them a luxury. In rural areas, cars are a necessity to get to and from work, and to get to the grocery store. Additionally, in rural areas vehicle-miles traveled is much greater than in suburban and urban areas. Students from rural areas felt owning a vehicle enabled practical tasks, and didn't view driving as a particularly sporty or adventurous activity.

When understood from a practicality standpoint, used cars are always the best choice because of lower prices, so the rural preference for used cars fits the narrative of pragmatism. Additionally, vehicles of choice in rural areas tend to be from more expensive full size pick-up and SUV segments. These segments see median transaction prices near $50,000 for new cars, almost $17,000 higher than the industry average. To offset the desire for more expensive types of vehicles, rural customers may turn to the used market for affordability.