Generation Z buyers will be more cost-conscious and cautious than millennial purchasers, but those qualities could bode well for the F&I department, Cox Automotive says.
Kelley Blue Book and Autotrader, both Cox Automotive companies, conducted a study on the future car-shopping habits of Gen Z, now ages 0 to 17. The study included a survey of 3,000 respondents, about 1,200 of which were 12 to 17 years old.
The youngest generation currently makes up 23 percent of the population, and its purchasing power is expected to reach $3.2 trillion by 2020, Cox Automotive said in a statement.
Gen Z buyers may be an easier sell on F&I products, such as extended service contracts, prepaid maintenance and GAP, Isabelle Helms, vice president of research and market intelligence for Cox Automotive, told Automotive News this week.
Gen Z buyers “would be much more inclined to purchase the products because they are a bit more risk-averse than certainly the millennial generation,” she said. Because they hang onto their wallet a bit tighter than millennials did, I foresee F&I products being something that they are very interested in.”
That gives dealerships and opportunity to teach potential consumers about F&I products before they walk into the dealership.
“That is the one thing that we see time and time again in our research,” Helms said. “Consumers are very interested in F&I products and would be more open to them if they could get a glimpse into what these services are before they set foot inside the dealership. I think this will hold and resonate, perhaps even more strongly, with this generation.”
Personal interactions
Dealers and automakers have honed their sales approaches to appeal to millennials, but what has worked for millennials won’t necessarily work for Gen Z, Helms said.
While they are likely to do excessive research online, only 26 percent of Gen Z respondents said they would purchase a vehicle online, and 68 percent said in-person interactions are important to them. More than half, which is relatively consistent with other generations, said they need to test drive a vehicle at least twice before buying it.
“They are the Amazon generation. They can pretty much buy anything they want” online, Helms said. “We expected them to have a much higher interest in purchasing a car online. They’re going to do a ton of research online, a ton more than their predecessors even. But when it comes time to purchasing a vehicle, they want to have a face-to-face interaction and conversation with someone.”
Helms suggests that when selling to Gen Z consumers, dealership staffers should “answer their questions, act as a consultant as opposed to a salesperson and guide them to purchase the right car.”
She adds: “The dealership experience is here to stay because they want to touch the car, because they want to engage with someone that can answer the questions they can’t answer themselves online.”
Budget-conscious
“One key difference between this generation and their predecessors, the millennials, is that they are far more budget-conscious than the millennials were,” Helms said.
Nearly 60 percent of Gen Zers surveyed prefer to save money over spending it and are concerned about student loan debt, the economy, unemployment and poverty.
“All of that really comes together to significantly impact their decisions around vehicle purchases,” Helms said. “They were the generation that watched their parents go through the recession. They have a different appreciation for money than their older counterpart. That’s a very distinguishing characteristic for them that sets them apart.”
Brands that they identify as more traditional, trusted and practical, such as Ford, Chevrolet and Honda, appeal to them most. Conversely, when millennials were surveyed as teenagers, they gravitated toward Audi, BMW and Mercedes-Benz, Helms said. A car represents freedom and convenience for Gen Z respondents, rather than a reflection of who they are.
“The car is the gateway to experiences for them. Experiences matter to them far more than materialistic things, which differentiates them from millennials,” Helms said.
More visuals, fewer words
Dealers and automakers have honed their sales approaches to appeal to millennials, but what has worked for millennials won’t necessarily work for Gen Z, Helms said.
Gen Z buyers digest information in bite-size pieces, Helms said. “They are accustomed to consuming information in bits and pieces. They’re also very highly visual, which is why Snapchat is such a popular app, why Instagram is in the midst of overtaking Facebook for many of them.”
She suggests marketing to Gen Z with creative, visual pieces that have just a few words that resonate with them.
“Tell your story as a brand across multiple screens,” Helms said, adding that Gen Z typically relies on four to five screens. “They hardly make a decision without seeking the guidance of their friends,” so integrate social media with selling strategy, she said.
“Then talk to them about value. That’s what will resonate. Value and safety are two very important characteristics for them,” Helms said.
Realism pushes Gen Z to reject perfection, Helms said, while perfection ranked high with millennials. Gen Z prefers seeing average consumers in ads over celebrities. But like millennials, they want brands to be “authentic and humble.”
“The want brands that give them control,” she said. “They like to be a part of the process.”
