Millennials are changing the car buying process and it's not just them ... and it's not just in the United States. This is a world-wide trend that includes the US as well as Europe and Australia too. This new generation of savvy shoppers knows how to do their homework and embraces news tools and challenges old business practices that our parents just accepted as status quo. Ultimately that's a good thing for those that are ready for a change
Before I get too deep into this discussion, I want to make sure that we are all on the same page. Millennials aren't a magical generation and age isn't the sole defining factor here. The reality is that most of these trends have roots that began to grow decades ago and not all millennials are the same. Likewise, there are old dudes like myself that are essentially digital natives too. This conversation about how millennials are changing the car buying process has been bouncing around in my head for the past few months. It started while I was on a road trip. My co-driver and I were discussing that many of these "millennial car buying trends" weren't really new at all ... they were how the two of us had been buying cars for decades.
Despite that, what's exciting now is that the process is becoming more streamlined and there are even more options available for those of us that hate going to a dealership.
The Online Generation Shops Online
Millennials (those born between 1981 and 1997) are the start of the online generation and as such they’re doing their due diligence before buying. According to Call Source, Millennials spend over 17 hours researching their vehicle before purchasing it and 71% of them need to be aware of all of their possible vehicle options. Millennial customers have single-handedly moved the car buying process online. So next time you’re looking to privately sell your old car, don’t just park it in the street with a for sale sign, advertise it online.
Online Research For Car Buying vs Newspapers
So where exactly are the millennials going to conduct this online research? Social media. According to D. Power 2016 New Autoshopper Study, among automotive internet shoppers, 22% use a social media site as a source. The most popular sites being YouTube (13%), DealerRater (7%) and Facebook (5%). However, among those who use social media, only 13% indicate that the information posted influenced their purchase decision and only 2% say a social site was the “most useful site” they visited.
Car Shopping Window Has Become Longer
According to the same Autoshopper Study, Millennials consider slightly more vehicles on average than Baby Boomers. They also take longer to decide what car to buy, with an average of 16.9 vs 15.7 weeks. Millennials also invest more time in the buying process, almost four and half more hours on average. In large part this is because they have the ability to shop, learn, and consider options from the convenience of their home, office, or mobile device instead of pressure in a showroom. It is also because they have far more options for data to consider. In fact, car reviews and videos are considered entertainment now, rather than a task that needs to be completed.
Millennials Hate Shopping for Cars In Dealerships
While Millennials do more research than any other generation when it comes to buying a new car, the process of actually shopping is one that they dislike. According to the 2016 Beepi Consumer Automotive Index 52% of car shoppers feel anxious or uncomfortable at traditional car dealerships, with Millennials leading the pack in their dislike with 56% saying they’d rather clean their homes than negotiate with a dealer. Millennial women (62%) also stated they feel pressured to buy right away and 49% said they felt tricked into buying features they didn’t need.
Car Buying Alternatives
Regardless of where they are located, Millennials are looking for alternatives to traditional car buying. When asked about newer car buying alternatives 54% said they would “love” to be able to buy a car without leaving the house and 42% admitted being “fine” with buying a car without going for a test drive first, so long as there was some form of guarantee from the dealer. This trend of services being able to sell or buy a car from home can be found in Australia as well as United States, UK, and pretty much everywhere else too.
What really interests me though is that traditional dealerships are adapting. For instance, CarMax is thriving with their no-haggle process and online dealerships can have a massive inventory and deliver the car directly to you with the entire transaction including finance being done online.
New Ways To Find Funds For Car Investment
With the price of cars on a constant increase yet the average wage stuck at a stand still, finding sufficient funds to invest in a car outright is becoming more and more difficult. Many millennials do not have steady jobs with long term contracts, so committing to a large lump sum payment can cause extreme financial distress. In order to work around this, many young people are choosing to go down the ‘finance’ route, in which you secure a car specific loan to make smaller monthly payments instead. It’s a good idea to take some time to explore a few car loan comparison sites to identify the very best providers, as interest rates can vary. Be sure to check reviews that have been left by previous customers, as this will give you a better look into the true quality of the service. Failing to stick to your contracted repayment plan could see you have your car seized, so never agree to a plan that you cannot see through to the end. The credit score that you have can affect your ability to secure car finance options, as a bad credit score can encourage lenders to steer clear. However, even those with the worst credit scores can achieve loans but just at a much higher interest rate.
Car Ownership May Be a Fading Trend
The real question for many of us in the industry though is, "what next?" Not only are Millennials abandoning the concept of entering a showroom and dealing with underpaid salesmen trying to close the deal. They are actually abandoning the entire concept of purchasing a car. While leasing has been a popular trend for the past couple decades, this trend of car sharing and urban mobility takes things a step further.
At one point, renting a car was something just for travelers visiting a new city. However, with services like Zipcar, you can have your choice of different types of vehicles ranging from a compact to a delivery van - rented by the hour for as long as you need it. Or if you know you will need a car regularly - but want to have simplicity, then there are car subscription services where everything is included from maintenance to insurance.
The future is pretty exciting and while there will clearly be some business models that work better than others, innovation generally makes things better for everyone!