Will Gen Z bring a new wave of vehicle ownership?
Born after 1996, Generation Z is entering the workforce in the tens of millions. In fact, Gen Z is the largest generation in U.S. history, influencing between $600 billion and $3 trillion in consumer spending. However, their car-buying habits are quite different from previous generations — including millennials.
Gen Z is pragmatic and frugal, facing unprecedented climate change, political upheaval, ballooning student debt and an unpredictable economy. They have a lot on their mind.
Traditionally, vehicle ownership has not been a priority for Gen Z. Growing up with Uber and Lyft has meant that many have put off getting a driver’s license. It’s not surprising. Buying a car was recently described by Forbes Magazine as a “painful experience.” Factor in the cost of insurance, clogged highways and traffic jams in most big cities, and no wonder Gen Z prefers car-sharing to car-buying.
But that may be changing.
The pandemic, the exodus from big cities and the rise of work from home has many wondering if Gen Z is finally getting ready to buy into car ownership. There is a sense that the COVID threat has made car-sharing and public transport a risk for far too many. And for some, a year of staying home has fattened bank accounts and created a pent-up demand for the freedom of the open road.
In fact, as auto demand has exceeded supply this year, average new loan amounts have risen to levels not seen in several years. Lately, Gen Z slightly edges out millennials in seeing the greatest increase in average loan amounts.
The auto industry is waking up to a new, car-friendly Gen Z. However, if dealers wish to succeed with this unique cohort, traditional sales and marketing approaches won’t work.
Selling to a digital-first generation
Gen Z, a digital-first generation of consumers, doesn’t remember a time before social media. They grew up with the internet and widespread connectivity across multiple devices, and this puts pressure on dealers and lenders to adapt.
Gen Z also knows how to find a good deal online — being web savvy isn’t just good for posting videos to Tik-Tok. These consumers will scour the web for special offers, knowing they can always find a better deal. So, for dealers working with Gen Z car-buyers, it’s critical to provide a seamless online-to-showroom buying experience.
Currently, auto dealers miss roughly 78% of social conversations about their business, according to FunnelAI, a consumer researcher that analyzes social platforms to understand buying intent. The company reviewed three years of data to come to its findings.
However, a fast and intuitive online experience is only one aspect of the buying decision for a Gen Z consumer. When it comes to auto financing, the online experience must also be seamless and stress-free. Gen Z wants to be in charge of structuring the deal. Being transparent about the different options available is key to winning their trust and their business. Just like most customers, the more comfortable they are, the more money they will spend.
#Activism: Voting with their wallets
Gen Z is the “woke” generation, and looks at a whole company, not just the products it sells. While the older generation may roll their eyes at their hashtag activism, Gen Z consumers wield outsized power because they vote with their wallets. This creates the opportunity for dealers and lenders to display genuine engagement within their local communities, or involvement in social causes, to differentiate themselves for this new generation of car buyers.
Vlad Kovacevic is the founder and chief technology officer of Inovatec Systems. JAVELIN by Inovatec is a state-of-the-art lending platform that provides lenders with workflows that easily adapt to a new generation of car buyers. Find out about Inovatec’s performance pricing model, a breakthrough for the industry.
