When Boomers Go, Who Will Buy Cars?

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While Toyota has had some success attracting younger buyers with Scion, at first both the Honda Element (BusinessWeek.com, 3/23/07) and Scion xB (BusinessWeek.com, 8/17/07)'s buyers were far older than the intended audience. And Chrysler fell into the same trap: It believed the PT Cruiser would lure youngsters into its stores, only to discover younger buyers didn't appreciate retro designs that look like Fords from the 1930s.

Ain't It Funny How Time Slips Away?

This year, many boomers who turned 18 in 1964, purchased their Mustangs, and listened to the Beatles on their one-speaker AM radio, will start collecting Social Security checks. And absolutely no one in the auto industry knows how sales will be affected when the greatest generation of new car buyers moves into retirement.

Nobody saw another change coming in 1974, the year automotive finance companies first offered 48-month financing to spur car sales during one of the nation's worst recessions. Up until then, the average car buyer traded for a new car every 27 months. As finance terms lengthened, most automakers were slow to accept the fact that the consumer dollars once primarily donated to Detroit and Tokyo were now being diverted to buy other wonderful consumer toys. And over the past three decades automotive trading cycles have stretched longer—and most assuredly will go even longer, as the 78 million boomers retire from public life.

Sha-la-la-la-la-la, Live for Today

While much has been made in recent years about the inequality of wage distribution in America—between the super rich and everyone else—it appears that the wages of those over 50 have improved against inflation since 2001. So the boomer generation also has a strong edge; this economic fact, it would seem, is primarily why boomers continue to lead in automotive purchases and luxury car manufacturers continue to set sales records every year.

That scenario soon will change, as on average 3.391 million baby boomers will retire or pass away each year until 2031. What should be keeping the car companies' executives awake at night is fear of the unknown: What will new-car sales be like without the boomers? The key problem is that the generations coming up have never quite had the same love affair with the automobile that boomers' had. But there's still hope for the group following the boomers; all its members need is more income.

In 1962, Iacocca saw the future of American car sales in the coming wave of baby boomers. Who would have thought that he would have outlived two of the Beatles to watch that generation age and start accepting Social Security checks? It makes you wonder: Who is the Iacocca of today? Who will lead the auto industry to deal with the next reality?

Ed Wallace holds a Gerald R. Loeb Award for business journalism, bestowed by the Anderson School of Business at UCLA. His column heads the Sunday Drive section of the Fort Worth Star-Telegram, and he is a member of the American Historical Society. The automotive expert for KDFW Fox 4 in Dallas, Wallace hosts the top-rated talk show Wheels, Saturdays from 8 a.m. to 1 p.m. on 570 KLIF AM in Dallas.