How Millennials’ buying habits change the auto industry
After more than a century on the road, the Americans are changing the way they drive. As of April 2016, the Millennials are the largest living population in the United States and they will make a huge impact on the auto industry. If you want your dealership to prosper, you need to get to know your target group well.
Millennials today are people aged roughly 24 to 37, and naturally, they continue to age. This means that, as they accept leadership roles and their once solo lives now start revolving around home and family obligations, their needs also change so they will need your services – buying and maintaining cars.
However, if your dealership is still dreaded by the thought of them as same ol’ car shoppers, things need to change – fast. Here are some frequent delusions about Millennials and their car buying habits.
Misconceptions about Millennials
Many dealerships still falsely believe that Millennials are not buying cars. This had been a fact when after 2008 and the Great Recession the Generation Y indeed could not afford them, but things are now changing. Salespersons today no longer fear the word ’Millennial’ – and why should they? The Millennials bought 4 million cars and trucks in the US in 2015, according to Power Information Network study conducted by JD Power.
As opposed to Generation X, which borrowed cars in a greater percentage at the same age, Millennials today love owning cars, even new vehicles. 29% of new vehicles are bought by Millennials, and by 2020 they are expected to be responsible for 40% of new car sales (source: JD Power). The reason for this might be that the interest was higher back in the day when Gen Xers were 20 to 30 years old, whereas today Gen Y can get a seven-year loan at the lower rate, as opposed to five-year loans of their older generation not to mention today’s short-term low lease payment options.
Even though this generation may still look slightly foolish to the older generations, reckless or even hasty –Millennials are not what they seem. In fact, they plan out their activities, future, and money, so whenever they invest, they have previously made a good calculation thereof.
They are delaying the purchase decision, but not foregoing it completely. JD Power also found that Millennials just need some more time to think about the car purchase than Baby Boomers – Millennials think for an average of 19.9 weeks as opposed to Baby Boomers who would give it a thought for 15.7 weeks.
How Millennials remodel the car industry
1. They drive more.
Fifteen or ten years ago, the first wave of Millennials was still in college or paying off student debt or still without a decent job to afford to pay for a home or a vehicle. However, things have changed in the meantime so now they are taking on responsibility and finding jobs that suit their lifestyles and getting married and moving to the suburbs.
Even though Uber brought quite a revolution to how Millennials travel and commute, they are the generation that drives more miles than Baby Boomers. In fact, an MTV study found that they drive 72% more than Baby Boomers and 18% more than Gen X.
2. Practical vehicles.
Surprisingly, Millennials do not quite fancy sports cars, but rather go for something more practical. And this comes naturally since their careers start to develop gradually and they look for things that will not complicate their lives, which are already complicated enough.
LA Times reports that when they move to the suburbs, they do not see the car as a status symbol (like Baby Boomers used to). Rather, its utilitarian use comes upfront. They are open to any brand and, as Ypulse survey showed – they “view cars as a practical need instead of an emotional want.” They want reliable and safe compact or mid-sized vehicles – to take them from point A to point B: usually from home to work.
3. Unique experiences.
Millennials are changing even the test drive. They want to get a complete overview of their experience and they want to see how the car would fit into their daily schedule. This is why many Millennials no longer want just an hour-long test drive, but want to extend it to a whole day.
We see a lot of dealerships adjusting to this trend, such as Toyota dealers, allowing their young customers to get a great feel of the car and take them home for a drive, or to get to work, or even to the open road or the mountains to test it in different weather conditions.
4. Truly social.
Millennials do everything differently. This generation entered the grown-up world in the age of Facebook, Twitter and reality TV – which shaped their image of reality significantly. When they decide to purchase a car – Millennials do it via social networks. They show it to their friends and connections who also may want to own one, too.
It is no wonder, then, that many car dealerships today opt for promoting their vehicles via Facebook, Instagram or Snapchat ads, thus provoking social chatter and attracting attention to their products and services.
Social networks, in turn, give a great insight of the market needs and bring the true meaning to the words ‘social listening’ (source: Brandwatch). Heck, just see what happened to Tesla’s Model 3 pre order which generated $10-billion in customer deposits within 36 hours.
5. Obsession with technology.
Growing up in the age of dial-up Internet and cell phones and mobile texting, the Millennials are said to be the first digital natives – they easily adapt to the innovation and convenience the technology brings.
Moreover, Inc. reports that “[more than half of Millennials said they would buy an autonomous vehicle, with almost 75 percent saying they would be comfortable having artificial intelligence system drive their vehicle. Millennials are not as interested as other generations in raw engine horsepower or torque, instead, they want affordable, environmentally friendly, sleek design, and high-tech features.”
Consequently, when buying a car, they expect cutting-edge technology with the features they are accustomed to, such as touch screen interfaces, smartphone applications, and in-dash technology. The latter includes rear-end collision avoidance systems, autopilot, night vision, blind spot detection, online/satellite radio, self-parking, OnStar, keyless entry or ignition, only to name a few.
6. Customized vehicles.
Many young people today see their vehicle as a reflection of their identity. And no wonder since the numbers JD Power found show the following:
- “41% of young car buyers prefer a vehicle with powerful acceleration and responsive handling, compared with 36% of car buyers of all ages
- 33% of young car buyers want their vehicle to stand out from the crowd, compared with 20% of car buyers of all ages
- 27% of young car buyers want to personalize their vehicle with options and accessories, compared with 20% of car buyers of all ages
- 22% of young car buyers like to drive on roads with hills and curves, compared with 13% of car buyers of all ages
- 19% of young car buyers say that others can tell a lot about them by their choice of vehicle, compared with 10% of car buyers of all ages”
Therefore, they want outstanding, personalized vehicles they can further customize if their lives or moods change.
7. Change of roles.
The older generations went to the car dealership to learn what cars to buy. Today, however, the younger generations first ask Google for advice. They research thoroughly beforehand and never let anything slide. When they decide what to invest in, they want it to be good so they look for tips and advice on social networks and blogs and learn from other drivers’ experiences.
CDK Global found that 85% of Millennials use the Internet via mobile devices, including car shopping. So they come to your lot full of knowledge and know exactly what they want to make a better deal for themselves. Thus, the roles have obviously changed: we see empowered consumers and salespersons who no longer need to convince you with all the data and numbers you already know.
Although these surveys can give us a glimpse of this generation’s buying habits, they are still only a glimpse and may vary from one person to another. People are all different, and even though we may make patterns and generalizations, your salespersons should nevertheless know the facts but approach every customer individually. By knowing them, we all grow – together.