In the past, when it came time to buy a car, the family loaded up and toured dealerships until they found one they liked, then spent the day wrapping up the purchase. Not only was this long process expected, it was also necessary as technology wasn’t as fast, negotiations went longer, and it took more time to get bank approvals.
Nowadays, information is freely available and banks have buyers lined up, waiting for applications to be approved. In some cases, if the credit is good enough, these systems simply automatically approve applications, making for a very quick and efficient process for the consumer.
However, despite the transactional efficiencies technology has brought to the car buying process, it can still take too long to purchase a vehicle at a dealership. This is especially the case in the eyes of Millennials, who want everything on their terms and want it NOW!
Millennials are slowly inching their way up and gaining ground as far the percentage of car buyers in the market. As a result, automakers are focusing marketing on and catering to that generational segment.
How different are Millennials as far as their expectations, and do they deserve the amount of attention they are getting over Baby Boomers? Let’s examine.
This generation knew when they went out car shopping that it was an all-day process. They wanted to see, feel, touch and experience the cars and could easily spend the day test driving multiple models and trim levels before even beginning the process of negotiations.
Does this mean that they liked that process? Not necessarily. Sure, there are some people who love the competition that negotiations bring – that feeling of winning that comes with getting a great deal on a car is akin to scoring the winning touchdown in the football game.
Today, the majority of Baby Boomers – while more willing than Millennials to go through the traditional process – would prefer an easier buying experience. Also, despite all of the attention Millennials receive, Baby Boomers are still the majority when it comes to new car buyers and are more apt to finance those vehicles.
NADA research shows that the average age of new car buyers is 51.7 and Baby Boomers account for 62 percent of all new car sales. They are also financing cars. According to the Wall Street Journal, in 2016, the average 65-year-old had 29 percent more automotive debt than a 65-year-old from 2003.
Sounds like a win-win for dealerships, right? Sales and finance revenue are riding squarely in the Baby Boomer’s generational group. This of course, is partially because Baby Boomers have advantages when it comes to car buying that Millennials do not. They’ve had a longer period of time to establish credit and are able to qualify for manufacturer financing incentives at no – or low – interest rates, making financing the vehicle and keeping the cash in the bank more alluring. They are also more attractive to banks because many have long work histories and have established a solid financial profile.
Millennials are a somewhat complicated generation. Some reports and studies indicate that Millennials are not interested in buying cars, but prefer ride-sharing, Uber and mass transit over car payments, while other reports indicate quite the opposite.
According to Jason Barrie, VP, Market Performance, Lender, Sales and F&I Solutions for Cox Automotive/Dealertrack, “Millennials, defined as consumers aged 18 to 34, made up 35 percent of loan originations in 2015, and their share will continue to grow. If you look at the scope of that size of the Millennial population, it’s the largest in U.S. history. This is what scares a lot of folks. Because it is such a large generation, the buying power is massive.”
As well, Millennials accounted for 28 percent of new car sales in 2015, up from 17 percent in 2010. So the data supports the fact that Millennials are increasingly buying cars and, should the trend increase, will eventually become the dominant generation doing so.
But what about their buying behaviors? Millennials didn’t grow up in the same world as Baby Boomers. They grew up with unlimited access to information and have become used to simple, fast and convenient ways to purchase things.
Because of this, unlike their parents, they are unwilling to spend all day at a car dealership. They’re impatient and typically arrive at a dealership knowing what they want to buy and, at times, possess more information than their salesperson. According to an Autotrader study, 23 percent of Millennials won’t wait longer than 10 minutes for a test drive, and 22 percent said that 20 minutes is too long to complete paperwork in the finance office. The problem with these
Millennials’ desires and behavioral expectations is that some of their generation differences can place roadblocks on their path to convenience.
For example, while Millennials are, in general, more educated than Baby Boomers, due to the increased cost of education, they leave college with large amounts of student loan debt. Simply because of their age, they have short credit histories with, in most cases, few credit cards. Many choose to stay at home longer versus buying a home. Or they rent because it’s harder to find employment. These factors lead to many that do not qualify for the subvented rates manufacturers advertise. Or the lender has to physically examine the application, which increases the transaction time as a whole.
From desking the deal, to applying and awaiting approval – Millennials are more likely to have to wait for a decision and there are more roadblocks that slow down the in-store process.
The Bottom Line
The end game for both a car buyer and a dealer is to sell a car. While Baby Boomers and Millennials may have generational differences in their perception of what a car-buying experience should be, and which processes they are willing to accept in that experience, both generations simply want an easier buying experience overall. Our society has increasingly become one of convenience, and those convenient experiences are embraced by all age groups.
Consumers have learnt about easier ways to buy cars via online processes and technologies – and they embrace them.
They no longer have to spend a whole day at a dealership, fight price with the anonymous “manager” in some mysterious back room with a Sharpie, argue the value of the trade-in or have some interest rate thrust on them. They already know all of the answers to those questions.
They can get price, payment, trade-values and interest rates online before they ever set foot in a dealership. Should they decide to forgo the dealership route altogether, these days they can pretty much complete the whole process online, and either pick the vehicle up, or have it delivered.
Amazon didn’t become the largest retailer in the world because they made buying things difficult. They made buying things incredibly easy. And they did that because that’s what consumers of all ages want today.
Consumer buying behavior is only going to shift more towards convenience. If your dealership chooses to make transactions difficult, you will only find your customers deserting you for your competitor’s lot.