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Joel Ohman is the CEO of a private equity-backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He also has an MBA from the University of South Florida. ...

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Reviewed by Joel Ohman
Founder, CFP® Joel Ohman

UPDATED: Oct 15, 2013

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As younger generations continue to struggle amid rising debt and low employment, experts say that the Baby Boomer generation has more car buying power and easier access to car loans.

Baby Boomers have a financial edge over younger generations since they are more likely to be higher educated, lacking debt and advanced in their careers. The latter specifically means they are able to earn sizable incomes, as opposed to younger generations who may have to work multiple low paying jobs amid the recovering economy.

In addition, Generations X and Y carry higher college-related debt and are less likely to own homes when compared to Baby Boomers. In fact, members of Generation X had only recently purchased homes when the Housing Crash hit, robbing them of wealth and, in many cases, their actual houses.

Different Priorities

Alan Fox, Owner of Blue Sky Classic Cars, says that there is a direct link between the types of cars that Boomers and younger generations tend to buy.

“Baby Boomers for example, often try to relive their youth,” he said. “Hence they are willing to spend more on a classic car, such as a 1967 Corvette, than they are on the family Sedan.”

Far from succumbing to comical mid-life crises, Boomers use their sizable wealth to purchase the cars that they were denied when they were younger. As middle-aged and older adults, they do not have much time left before driving will prove difficult, hence the desire to buy “flashy” vehicles to enjoy in the moment.

Fox has seen that younger generations tend to skew into two separate paths when it comes to buying a car. Either they spend the money to impress their friends, or they buy a reliable commuter car to help them in their early careers and oftentimes at their first jobs.

Those younger adults fortunate to have the income or wealth for expensive car purchases are few and far between when compared to the more typical case of recent or upcoming graduates who need vehicles out of necessity. As one can imagine, the latter tend to make more economical purchases, assuming they can get qualified for a car loan or pay for their desired vehicle in cash.

A more abstract reason may be responsible for why Boomers are currently more successful than younger generations.

“I feel a big part of why Boomers will be wealthier than Gen X or Y is because of a work ethic,” said Fox. “Boomers were taught by their parents that if you get an education, work hard, and live within your means you will have a good life. Boomers taught their kids that everybody was a winner no matter how well or poorly they performed.”

He pointed out that we live in an age where children often receive trophies universally. This builds up a sense of entitlement that they carry on into adulthood.

“Some of them would have been better off going into the trades where good jobs are going rather than majoring in feel-good majors,” said Fox.

The Plight of the College-Educated

Adam Kushner, a consultant for Business Actualization, said that in his fifteen years of experience, he has seen Boomers using their better credit and wealth to co-sign on car loans for their children who are oftentimes strapped with student loan debt.

This college debt is actually the main reason why there is such a wealth divide between Boomers and their following generations since the cost of a higher education has skyrocketed in recent decades.

Interestingly, Kushner found that Generation X prioritizes putting money into businesses, rather than into buying cars. While Generation Y is known as the children of the internet, and count such visionaries as Facebook’s Mark Zuckerberg and Tumblr creator David Karp among their ranks, individually it would seem they lack the will or means to put money into starting businesses.

“Today, college students through Generation Y are faced with substantial debt from college and their first car purchase,” he said. “Gen X had a better start, not getting into this debt from college and car loans. As the first wave of Gen X is in their 30s the gap is really becoming evident.”

As a balance to this though, Gen Y has ready access to credit cards compared to their predecessors, although this can be a double-edged sword if overspent.  

Kushner said that Generation Y does not necessarily face a more difficult qualifying process for getting a car loan, but for the majority of youth with college debt, it will mean they will pay the highest interest. In contrast to this, Boomers have better credit scores than youth, in addition to being more likely to own home equity given their longer careers and experience.

“I will say that the gap between those with good credit and poor credit will probably not get smaller,” he said. “I think that Gen Xers really got a better head start to a sound financial portfolio.”