The Evolution of Lending

Gen Z Is Getting Ready To Buy A Car. Are You Ready?

Byline: VLAD KOVACEVIC

Post Summary:

  • The Serious Buying Power Of Generation Z
  • Gen Z Car Skeptics Are Coming Around
  • Selling To A Digital First Generation
  • #Activism: Voting With Their Wallets
  • Contradictions We Love

Born after 1996, Generation Z is entering the workforce in the tens of millions. In fact, Gen Z will be 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 to previous generations – including the Millenials. 

Generation Z is pragmatic and frugal. Is it any wonder? Gen Z faces 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 Gen Z’s have put off getting their 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 24/7 traffic jams in most big cities, no wonder Gen Z prefers car sharing to car buying.

But that may be changing. 

The pandemic, the exodus from the big cities and the rise of work from home has many wondering if Generation 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 too far for many. On the other hand, a year of staying home has fattened bank accounts for some 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. To everyone’s surprise, Gen Z slightly edges out Millennials in the largest increase in average loan amounts.

The auto-industry is waking up to a new car friendly Generation Z. However, if they wish to succeed with this unique cohort, traditional sales and marketing approaches won’t work. 

Selling To A Digital First Generation.

This is a digital first generation. Gen Z doesn’t remember a time before social media. They grew up with the internet and widespread connectivity across multiple devices, which puts pressure on dealers and lenders to adapt. 

Gen Z knows how to find a good deal online. Being web savvy isn’t just good for posting videos to Tik-Tok. They will scour the web for special offers, knowing they can always find a better deal. Which is why one of the most critical items for dealers when working with Gen Z buyers is providing a seamless online-to-showroom buying experience.

And yet FunnelAI  – a company that utilizes a variety of social platforms to understand buying intent – reviewed three years of data to find that auto dealers in particular miss roughly 78% of social conversations about their business. 

Anthony Mitchel, a Professional Services Consultant at DealerSocket recently shared his insight into Gen Z buying habits with Automotive News: “Gen Z wants to research and compare vehicles on fast and intuitive websites, where they have an up-to-the-minute listing of a dealer’s inventory, with discounts and other pertinent information easily available,” he explains, “Gen Z customers want to shop for a vehicle the same way they shop on sites like Amazon”.

But a fast and intuitive online experience is only one part 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. Gen Z looks at the company, not just the products they sell. While the older generation may roll their eyes at their hashtag activism, Generation Z wields outsized power because they vote with their wallets. This creates an opportunity for dealers and lenders to display genuine engagement within the local community or involvement in social causes to differentiate themselves with Gen Z buyers.

Like any generation, Gen Z are full of contradictions. They are famous for rejecting SUV’s due to their perceived impact on the environment, and yet Gen Z is passionate about classic cars. According to Driver Magazine, 22% of Gen Z drivers own a gas guzzling collectible car – and a full 53 per cent of them want to. Classic cars? That, at least, is something we can all agree on. 

Welcome to the open road Gen Z! We’ve been waiting for you.

VLAD KOVACEVIC is the Founder and CTO 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.