Millennials – roughly those born between 1980 and 2004 – are late to join the car-buying masses. In fact, they also appear to be late to everything else – leaving home later, getting married later, and having families later. But latest reports indicate that this generation is finally entering the market en masse!
A recent study by J.D. Power’s Power Information Network reported that the share of Millennials in the new car market jumped 28 percent. By 2020, Millennials are expected to capture 40 percent of car sales. This is great news for those who thought the entire generation would forego a car purchase. But the Millennial care-abouts and approach to purchasing a vehicle are very different from traditional car buyers. Are you prepared for these changes?
Vehicle as Utility…not Social Status
In the past, vehicles were viewed as an extension of the buyer’s personality or social status in life. Got a promotion? Get a luxury or a sports car. At the moment, Millennials sacked with college debt don’t have the luxury of thinking this way. For the time being, a vehicle is seen a means of transportation by this generation. It is an easier way to get groceries home or ferry a growing family. In fact, according to a survey by the personal finance website NerdWallet, 43 percent of millennials said owning a car was a hassle!
But don’t think for a minute that Millennials will buy just any car. While horsepower and engine torque may not interest the group as a whole, technology does. A study of Millennial car shoppers by AutoTrader showed that 70 percent of buyers listed technology and infotainment as “must-haves.” Want to grab the interest of the Millennial car buyer? Then you better know how to pair their smartphone with the vehicle via Bluetooth, and conduct a thorough demonstration of the navigation and infotainment system.
Manufacturers at this year’s car shows will have the latest technology on display, including mobility features, various forms of Autonomous Driver Assist Systems (ADAS), and safety features that push the limit of self-driving capabilities. Millennials may be the most safety-conscious generation to buy a car. Remember, they grew up being buckled into car seats and slathered with sunscreen! Gone are the days of car sales people commenting, “Gee – I really don’t know how that works.” Millennial shoppers will demand a complete review of a vehicle’s technology, and will walk away if not satisfied with the features.
Millennials are budget conscious – and they have to be. According to the Federal Reserve Bank of New York, outstanding student loan debt stands at $1.31 trillion, spread out over 44.2 million Americans. With an average monthly student loan payment of $351 extending well into the future, this market is looking for vehicles that they can fit within their current budgetary constraints.
A study last year from LendingTree.com reflected an increase in auto loans for drivers aged 18 to 34. However, the average loan amount was $3,000 lower than for those aged 35 and up. While an increase in disposable income could account for the difference, in general the Millennial remains cautious about taking on more debt.
With Millennials beginning to flex their buying power, now is a great time for dealerships to evaluate how they approach this new generation. Are your sales and F&I departments trained to ask the right questions to get these consumers in the right car with the right financing and F&I products for their needs? Do you have strong relationships with lenders across all credit tiers, and are your F&I managers equipped to submit applications lenders want?
Considering the uncertainty many Millennials are facing as they work to overcome mountains of debt, grow a family and build a strong career, it’s important that you do your utmost to help give them a sense of stability with strategic F&I products. Products like a vehicle service contract or vehicle return protection have the ability to further protect this demographics’ budget from unexpected expenses, and their loans from the risk of delinquency or default.
By providing a sense of security from life’s unpredictable nature, you are giving Millennial consumers a tangible service of significant value. Beyond directly addressing pressing consumer needs, these products also have the potential to increase your bottom line through the sale of upgrades, and generate repeat and referral business.
With more than 40 years helping dealerships overcome the challenges of the day, EFG Companies knows how to equip your dealership to cultivate profitable opportunities with the growing Millennial market. Contact us today to find out how.