Cars and Drivers

Will Tax Refunds Get Millennials to Start Buying Cars?

Paul Ausick

Published: March 1, 2016 1:20 pm

Last Updated: January 13, 2020 12:30 pm

The conventional wisdom regarding the millennial generation is that they aren’t buying homes or cars in anything like the numbers of previous generations. Research has indicated that the 18-to-34 year old millennials are more interested in experiences than owning stuff.

Relatively low-cost air travel and reasonably priced accommodations (Airbnb) combined with services like Uber and Lyft encourage travel experiences. Houses and cars may conjure visions of anchors in millennials’ imagination rather than pictures of stability. Many people have pointed out that growing up is overrated.

AutoNation Inc. (NYSE: AN) and Fractl recently completed a survey of millennials who were asked if they expected a tax refund for 2015; if so, how large it would be; and if they would spend the windfall on a car purchase. It appears that millennials may be more interested in cars than everyone thought.

Of more than 2,000 millennials surveyed, about 97% said they expected to receive a tax refund for 2015 and more than 40% expect at least $1,000 with about 10% expecting $2,500 to $4,999 and 5% expecting $5,000 or more. According to the U.S. Internal Revenue Service, the average tax refund in 2014 was $3,211.

When asked if they would use the money to purchase a new or used car, nearly 75% said they would use the refund to purchase a used car and about 25% said they’d use it to purchase a new car.

And if someone wanted to buy either a new or a used car, the top three brands were Honda, Toyota and Ford.

When asked how much they’d spend on each auto brand if they used their tax refund to purchase a vehicle, the respondents would spend the least ($1,000 to $4,999) on Cadillac, Chrysler and BMW brands and the most ($25,000 or more) on Mercedes-Benz, Volvo and Mazda brands.

Last year industry research firm Edmunds.com surveyed millennials and found that most would not make a down payment of more than $3,000 nor would they be willing to pay more than about $300 a month for a vehicle. An average tax refund could meet at least half those requirements. And some promotional pricing could attract those millennials (as well as older buyers) into show rooms in the next couple of months.