Will This New Study Pressure Parents to Buy New Cars for Their Kids?

There are few things more exhilarating to a teenager than being given the keys to their very first car. For parents it's often not so much "exhilaration" as a sheer moment of terror, both for the safety of their child as well as their soon-to-be skyrocketing insurance bill.


Source: State Farm, Flickr.

It's no secret that teenagers have the highest insurance rates on the road – and for good reason. Teens are inexperienced drivers who often don't understand a vehicles' capabilities or fully grasp the gravity of staying safe behind the wheel (said the author who racks up speeding tickets like they're badges of honor).

With that being said, parents do their best to reduce teens' temptation behind the wheel by putting them behind the wheel of a vehicle perceived to be safe and economical, and also not too costly. My first car was a 1990 Dodge Dynasty. Let's just say it wasn't the go-to choice when my friends and I were leaving high school at the end of the day, but it also kept me from getting any moving violations, or worse, winding up in an accident.

Buying an economical used vehicle or passing down a vehicle that has been in the family for years is something parents have done for teen drivers for as long as I can remember. However, the latest study out from the Insurance Institute for Highway Safety, or IIHS, could change all that.

Source: Brady Holt, Wikimedia Commons.

This study could change everything
According to IIHS' study released this past Wednesday what type of car a teen drives could have a meaningful impact on whether or not they survive a collision. IIHS' data notes that 82% of teen driving fatalities occurred in vehicles that were at least six years old, with 48% of those teenage deaths occurring in vehicles 11 years or older. Comparatively, 77% of adults aged 35 to 50 years suffering fatal crashes were in vehicles that were at least six years old.

Not only are teenagers more prone to be driving an older vehicle, but they also tend to drive smaller cars as well. IIHS data shows that 29% of drivers aged 15 to 17 who were killed in an auto accident were driving small cars or minicars, compared to just 20% for the adult population aged 35 to 50 years.

Why the difference between teen and adult crash fatalities you wonder? I see three main reasons.

First, teens are lesser-experienced drivers, so they're more prone to get into accidents, which we established from the get-go. Secondly, adults tend to purchase newer vehicles, and newer vehicles often have improved safety enhancements (side air bags and collision detection, for example) to protect the driver in case of collision. Finally, adults tend to drive larger vehicles, such as SUVs and trucks, which weigh more and protect the driver better during a collision.

Source: Laura Cummings, Flickr.

Will a new car be on the docket?
This data could mean that parents may want to rethink their strategy of buying smaller and/or used vehicles for their teens and consider purchasing newer vehicles that'll offer them better protection if they get into a collision. Of course, parents also have to be careful not to put too much horsepower within reach of their teen when buying new because, as IIHS warns, higher horsepower could tempt teens to drive faster.

With the being said, I believe this study could spur parents and teens toward purchasing new vehicles. Automakers have a natural incentive to attract a younger audience as young drivers tend to be more impressionable. They're also likely to remember their first car, meaning automakers have an opportunity to forge an emotional connection with teenagers if they can win their business. The end result could be a customer for life.

Of course, the flipside to this scenario for car companies is that catering to teens lowers their margins. Parents and teens are often working with smaller budgets so automakers need to hit reasonable price points in order to attract buyers. In other words, automakers often take a margin hit to sell less-expensive vehicles in the hope that the dependability and reliability of the vehicle brings that consumer back to the same brand within a few years for a higher-priced model.

Could these three models benefit?
Although there are a myriad of new vehicles that could potentially fit the bill for teen drivers following IIHS' report, I'd suggest that these three models could be prime beneficiaries:

Ford Focus
Ford
(NYSE: F  ) has been doing just about everything right lately, and there's no reason it couldn't add to its prestige in the states by courting both parents and a younger generation of drivers. Parents will like the Focus because it was an IIHS top safety pick in 2014 with an acceptable rating in the small overlap frontal crash test and good marks (good is the highest rating) in the other four categories.


2015 Ford Focus, Source: Ford.

Both teens and parents should love the new gadgets that Ford unveiled earlier this year for the Focus. Included is an updated operating system known as Sync 2 which is considerably more user-friendly, a perpendicular parking feature that uses sensors at the rear of the vehicle to control steering of the vehicle so the driver only needs to use the gas and brake to ease into a parking spot, and a cross-traffic alert feature which warns drivers of oncoming traffic when they're backing out.

Most importantly, the Focus is affordable with an MSRP of less than $17,000 for a base model in 2014. Combined with currently low lending rates parents could potentially afford a Focus without breaking their bank.

Honda CR-V
Although the Honda (NYSE: HMC  ) CR-V wasn't a top-rated pick from IIHS, doomed by a marginal rating in its small overlap frontal crash results , the fact that Honda sold nearly 304,000 of them in the U.S. last year would be a testament to its quality and reliability which could make it a comfortable choice of parents for their teen driver.


2014 Honda CR-V, Source: Honda.

Think about all the different factors that would work in Honda's favor here. The CR-V may be a smaller SUV, but as an SUV it's perceived to be more protective of the occupant in a crash. In addition to that perception, the CR-V also comes with front and side airbags, side curtain airbags in case of a rollover, and has vehicle stability assist which will automatically throttle down the engine in case of an oversteer or understeer.  Also, Honda's reputation is based on being economical and reliable. In essence, Honda's aren't built for speed, but to instead help the driver and his or her occupants get safely from point A to point B.

The CR-V is a little pricier than the Focus with a $23,100-plus base price, but teens and parents won't sacrifice much with its excellent fuel economy and the solid reputation behind the brand.

Chevrolet Malibu
This last pick, the Chevrolet Malibu made by General Motors (NYSE: GM  ) , may be a bit of a stretch compared to the previous two vehicles, but it's the one I suspect more teens would be willing to get behind the wheel of.


2015 Chevy Malibu, Source: General Motors.

The reason I suspect teens will be all over the 2015 Malibu is its vast array of new technologies which include the MyLink digital interface for seamless control of your music, mapping, and mobile device, the Malibu's hands-free Bluetooth capabilities, and most importantly, the 4G-LTE WiFi connection built into the car! There's absolutely no way GM wasn't specifically targeting this car at a younger audience with these features.

On the flipside, parents will enjoy the fact that IIHS anointed the 2014 Malibu with a top safety pick-plus, its highest rating. The Malibu comes equipped with 10 air bags, StabiliTrak electronic stability control, and optional features like blind zone alert and rear cross traffic alert to help drivers avoid collisions. Best of all, it can get up to 36 mpg on the highway and starts for around the same price as the Honda CR-V.

With Malibu sales stagnating between 198,000 and 210,000 over the past four years a significant push focused at parents of teen drivers could be just what's needed to drive Malibu over its recent speed bump.

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