How Gen Z will buy F&I

Generation Zers are nothing like their millennial predecessors, experts say. As customers, they will be more technologically familiar and transparency-conscious. As employees, they will be competitive more than collaborative.

"Some of the biggest collisions on the horizon [will be] between the millennials and Gen Z. If people try to treat Gen Z like the millennials, that will backfire," said David Stillman, co-founder of consultancy Gen Z Guru in Minneapolis and co-writer of the book Gen Z @ Work: How the Next Generation is Transforming the Workplace with his Gen Z son Jonah.

The distinctive traits of Gen Z's 72.8 million members — born 1995-2012 — mean that the way finance and insurance products are sold must evolve, Stillman said. The process has to be more streamlined and rely on technology and transparency. "Gen Z can quickly look on their phone as to where they can buy the products cheaper, and it's not scary to them. It's probably easier for them to do that," he said.

Gen Z members — the oldest of which have entered their 20s — have two distinguishing characteristics: Many came of age during the Great Recession and most started using technology at a young age, making them "digital natives," Stillman said. Thus, many Gen Z customers will do F&I research ahead of coming to a dealership and lack the patience to wade through "reams of paperwork" in an F&I office, he said.

To do their research, Gen Z will use apps provided by "third-party disruptors," said F&I specialist Becky Chernek, president of Chernek Consulting in Atlanta.

"These apps provide the customer everything they're looking for in terms of financing and leasing. Some will give the customer a real-time analysis of what their credit is," she said. "This is well before customers go into the dealerships, so trying to get one over on these customers is going to be tough because they'll have that information earlier on in the process."

Dealers who are slow to recognize Gen Z's affinity for technology and equip their websites with self-desking capabilities will fail, Chernek said, because "these kids aren't slow to adapt and ["disruptor" apps are] where they're getting their information, and the information is solid."

Also, Stillman said, Gen Z wants F&I managers to tell them when they're signing a legal compliance form and when they're signing a contract for an F&I product. "They are OK with being sold to, but they want to know" which form is which, he said.

The best way to sell Gen Z F&I products is to introduce the products early in the car-shopping experience, Chernek said. "They want to know about the product in advance and when you do that, they'll have a better understanding of it," she said. "So when the F&I person or this hybrid salesperson is going over the features and benefits of these ancillary products, they'll have a better understanding of what's happening and won't feel rushed or pressed into making a decision."

Also, be consistent in pricing and expect to be challenged, Chernek said. "Will [Gen Z customers] get online to check the pricing of wheel-and-tire insurance? Sure they will," she said. "But if a good F&I person understands their product and the value of their product and that pricing is based on market value, then there's no problem. But you better have your ducks in a row."

If Gen Z is on the other side of the desk, selling F&I products, they will do it well and want to be rewarded. "If I were to predict," Stillman said, "I would say Gen Z will take an entrepreneurial pay plan, saying: 'If I perform, I should get paid for it.'"

That's because unlike millennials, Gen Z grew up without participation awards, Stillman said. There were clear winners and losers,therefore, they are competitive, he said. "This idea of fairness doesn't work for them. If you don't reward them, they will have their side [job] and figure out other ways to make money," he said.

Yet Gen Z workers will "bring a breath of fresh air to the F&I office," Chernek said. They will have a mastery of technology but recognize the value of "being real and meeting customers face-on, being really upfront."

F&I's future is changing with this generation, Chernek said, so dealers must consider: "'Are we Blockbuster or are we Netflix?' We have to change with the times and not take these guys for granted. Give them the information early on, rather than let them do the research on their own and then go on their own to establish financing."