The student-loan conundrum

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In Monday’s Trade Only Today newsletter, a story by Reagan Haynes cited a report in The Wall Street Journal that said many people making six-figure salaries are less likely to be able to afford buying a house. And because around 90 percent of boat owners also own homes, this could have implications for the marine industry, according to Jack Ellis, co-founder of Info-Link, a firm that tracks boating data.

But there’s another strong current pushing against boat ownership: student-loan debt.

Nationally, total current student-loan debt could buy every house on the market in the United States 1.9 times, according to a study by Realtor.com.

The average amount owed individually is $34,000. That’s $8,000 more than the typical house down payment of $26,000. In Ohio, home down payments average about half of the average outstanding student-loan debt. According to the study, California and Hawaii have the highest down payments in relation to student-loan debt.

If your sales team wonders why they’re not selling more to the largest U.S. demographic, the millennials, here’s how to put it together: The number of families earning more than $100,000 a year that are unable to afford purchasing homes is on the rise, according to the WSJ report.

Let’s drill down some numbers from the top boat-sales state, Florida, where total student loan debt is $75.9 billion. That includes 2.2 million borrowers who owe an average of $34,544 each or about $10,000 more than the typical down payment on a house worth $205,000. Will they be boat buyers? Not likely. And while the study did not identify the demographic, logic says these debtors are primarily millennials. If they can’t get into a home, they’re not likely to be primary targets for a new boat.

The average boat buyer today is actually a Gen Xer who is around 45 because it takes that long to accumulate the wealth and equity necessary to afford a boat, Ellis says. While the precise definition of the Gen X demographic varies slightly depending on the source, most agree they were born between 1965 and 1981. That makes the oldest 54 and the youngest 38. They are already in or about to hit their prime earning years. And, notably, of 1,000 Gen Xers polled, 68 percent reported they own homes.

Baby boomers (born between 1946 and 1964) — once the generation of more than 85 million that lifted our industry to a record size and sales when they were in the Gen X age range — now number less than 64 million, and that number is shrinking at the rate of 4,700 a day. Moreover, boomers still hold the most wealth of any demographic, which logically would be passed down to their kids.

No matter how we slice and dice it, it’s clear our primary sales targets should be the Gen Xers. Yes, it’s likely many of the youngest boomers are still a dealer’s loyal repeat customers, assuming such a relationship was maintained. However, new customers are primarily going to be Gen Xers.

So what about those millennials? According to the accepted definition, the oldest millennial is 38 years old and the youngest is 24 years. They are unquestionably the promise for the long-term growth of boating. And the good news is that the leading edge of this demographic is getting close to entering their primary earning years. Moreover, there sheer numbers will eventually fuel boating’s healthy growth for more than 2 decades.

So while we wait for millennials to pay off student loans and buy homes, we can encourage them to enjoy boating experiences through clubs, boat sharing, and spending time with family and friends who have settled their debts and enjoy the boating lifestyle. 

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