Income Inequality Is Killing Sports Cars
Seems like this has been happening for many years.
Seems like this has been happening for many years.
.Why are attainable enthusiast cars disappearing? Because young working people can no longer afford to buy them
Car fans are tired of being told we can’t have nice things. The ensuing refrain is that the enthusiast market is too small to be sustainable. Given the U.S. population alone has increased by 80 million people over the past 30 years, you’d imagine that potential buyers—of sports cars, of hot hatches, of stylish coupes or tossable roadsters or sneaky-quick sedans—would be more numerous than ever. So why is the market drying up?
To figure out what’s happening, we have to jump back in time. In 1990, the median wage for a young man aged 25 to 34 was $21,393 a year. The original Mazda Miata had just arrived the year before, with a base price of $14,000, and the median house price was just 3.7 times that wage, at $79,100.
Here’s the problem. In 2019, the median wage for the same young man was $42,212. A base 2019 Miata retailed for $26,500—proportionally stable at roughly 65 percent of the median annual wage. The real shocker is housing. In the ensuing years, the median home price has shot up to nearly $325,000 in the U.S. (per the St. Louis Fed, as of October 2020), a full 7.6 times the median annual wage of our young earner. And even if our hypothetical 25-to-34-year-old isn’t trying to buy a house, if he’s renting, he’s likely dealing with astronomical prices, especially if he’s living in a major city—not to mention the unprecedented student loan debt his generation has incurred.
The situation is even worse for young women. In 1990, the median wage for women aged 25 to 34 was $12,589, rising to $35,491 in 2019. And in every age and income bracket, women make less than their male counterparts, putting them at an even steeper disadvantage in terms of buying power.
Americans in this age group are in the prime of their youth, a time when a lack of responsibilities would historically pair with an influx of real adult income. It’s a precious window, a time when many would splurge on a brand-new sports car before children or other practical commitments got in the way. In decades past, one might have expected a new college graduate starting their first grown-up job to choose themselves a flashy new ride as a treat. But with a financial Sword of Damocles hanging above their heads, the young adults of today hesitate to make the same call.
In the last 40 years, wage growth in the U.S. has screeched to a halt. Past decades have seen huge increases in productivity, yet the majority of the extra wealth generated by that more-efficient labor has been siphoned off at the top, with workers seeing few of the spoils. Facing low wages, huge housing costs and unprecedented debt, young people aren’t rushing to buy new cars. They’re still driving hand-me-downs, or spending just enough on a used car to get something that won’t bankrupt them in repairs. Without such penny-pinching measures, the average worker in this age bracket has little hope of ever getting on the property ladder and building up equity for a safe and comfortable retirement.
The statistics bear this out. The average age of the new car buyer has shifted radically upwards in recent years. In 2007, those over 55 made just 31 percent of new car purchases. Ten years later, they made up a full 52 percent of new-car buyers, with younger Americans dropping out of the market in droves.
Of course, automotive diehards always find a way, making do by hooning whatever goes cheap on the used market. The real loss to the scene is the potential enthusiast. I can’t count the number of non-car people that have come to me asking for a recommendation. They’re in the market for a car, and now that they’ve spent a few years in the workforce, they want to treat themselves to something fun. A daring color, perhaps, or a racier engine. Maybe even a convertible or something to take on off-road adventures. I’m always happy to share my knowledge and point them towards a slightly unconventional choice. But break it down for them—the poorer gas mileage, sometimes-shaky reliability, and higher payments and maintenance costs on an “interesting” car—and they’re often left with no real choice. When your financial stability can be obliterated by one unexpected hospital visit, or your job is constantly at risk of being downsized, those vehicular upgrades start to look like liabilities.
Those potential enthusiasts, the young professionals who almost bought a Mini Cooper S or second-hand BMW as a treat? They inevitably end up in a cheap, economical hatchback or practical-seeming crossover. They never head out to Cars and Coffee, or join a car club, or meet up with friends for a Sunday drive through the canyons. They never even dream of attending a track day. Every spare penny they have goes into a savings account they pray will one day be a down payment on a house. The car scene mourns the loss of a new friend it never met, and the hobby grows a little smaller, and a little older, a day at a time.
What we’re left with is a car culture with a growing hole in the middle. On one side are the zealots, those who’d die before they gave up modding and wrenching, beating the snot out of their latest Craigslist score. On the other side sits the moneyed brigade, rolling around in the latest factory special editions fresh off the dealer lot. To them, there has never been a better time to be a car enthusiast, with factory hot-rods putting up numbers that were once the realm of the fiddly homebrew.
It’s the middle that’s shrinking. Once, a young worker with a rising career could have bought a flashy new ride and started a lifelong obsession. Now, for many, it’s simply too big a risk to take.
The solution is simple, yet inordinately difficult. If we want to welcome more young enthusiasts into the scene, we need wages to rise. The money is there; the problem is how it’s being distributed. If America returned to an income distribution like we had from the 1940s to the 1970s, the median worker would earn an additional $40,000 every year. That money would go a long way to paying down student debts (or medical debts, or credit card debts), securing mortgages, and maybe, just maybe, purchasing a sweet two-door to park in the garage.
It’s no coincidence that the era when American workers had their greatest buying power—1945 to 1974—launched some of the most influential, innovative, and exciting cars in the history of the automobile. The decades since have seen a gradual, slow decline in the market’s appetite for attainable enthusiast cars, and a subsequent unwillingness among automakers to cater to a shrinking customer base. Until economic conditions change, we’re unlikely to gain back what we’ve lost.