Baby Boomers Making Unexpected Car Buying Choices

"It was once thought that when baby boomers could put college tuition payments and other parenting expenses behind them, they would reward themselves with expensive luxury cars," commented Edmunds.com Senior Analyst Michelle Krebs. "But that was before economic catastrophe struck. Now that their kids can't find jobs and their nest eggs have shrunk, they are re-thinking everything, including their vehicle choices."

Their vehicle choices fall into one of three sweeping categories: efficiency, lifestyle and indulgence.

Many baby boomers are choosing vehicles that allow them to save money and gasoline while presenting an environmentally conscious image. A smaller vehicle not only means a smaller gas bill but likely also a smaller monthly payment and cheaper insurance-but not much sacrifice in the driving experience, since today's compact cars are stylish and can be loaded with features.

Baby boomers seeking efficiency are often drawn to Chevrolet Volt, Ford Fiesta, Honda Fit, Mini Cooper, Nissan Leaf, Toyota Prius and Volkswagen Jetta TDI (diesel).

In February 2010, sub-compact model sales were 23.8% more than in 2009 and compact model sales beat last year by 14.5%. Year-to-date sales for the two categories are up 11.0% and 14.4% respectively. On an individual model basis year-to-date, the real winners are the Chevy Cobalt (up 100.3% over last year), Nissan Versa (up 74.4% over last year) and the Volkswagen Beetle (up 89.1% over last year).

Other baby boomers-especially those who often carry the grandkids or have hobbies that require hauling capability-are not ready to give up the functionality of a larger vehicle. Since their SUVs have become politically incorrect, many are buying crossovers-which have the interior space and versatility of an SUV but ride on the architecture of a car instead of a truck and therefore get better fuel economy.
The midsize CUV segment is showing sales that are 35.3% ahead of last year at this time. The models leading the charge in an increase in sheer number of units sold are the Hyndai Santa Fe which is up nearly 5,000 units and the Ford Edge showing more than 4,000 units this year than last.

Of course, some baby boomers are rewarding themselves-but luxury leaders Audi, BMW, Cadillac, Lexus, Lincoln and Mercedes are not the only automakers attracting their attention. Some boomers who are nostalgic for the past want the car they had in their youth - or the car they wanted in their youth. This segment is giving new life to Detroit muscle cars such as Chevy Camaro, Dodge Challenger and Ford Mustang. And performance is being redefined to mean not just raw horsepower but fuel efficiency in a luxury or sport package. We're seeing highly efficient diesel-powered Audis, BMWs and Mercedes, and hybrid versions of the BMW X5 and Mercedes S-Class.

Within the premium lines, the Mercedes E-Class is up 69.6% and the Acura MDX which has increased sales by 37.0%.

"At the recent Geneva motor show, I also saw Porsche and Ferrari hybrids-perhaps the dream cars of many baby boomers," notes Krebs. "Ultimately, we boomers haven't changed: we still want it all."

Finally, indulgence comes in all segments and price categories. Just because boomers downsize doesn't mean they are willing to give up the pampering and rewards they have grown accustomed to. They want not only heated but cooled seats, navigation, phone-hands-free and voice-activated-their own music. And automakers are accommodating with features like Ford's Sync.

Source: Edmunds.com, JD Power, Fast Lane Research