How will a generation of post-recession digital natives behave in the auto retail marketplace?
Dealers and auto lenders are grappling with that question now, according to the latest TransUnion report, as more customers from Generation Z come of age and apply for auto loans. Auto balances for customers born after 1995 grew at a higher rate than for any other generational cohort in the second quarter, the credit bureau said last week.
Nearly 4.4 million Gen Z borrowers carried an auto balance on their credit portfolios in the second quarter. That's just 5.1 percent of consumers currently carrying an auto balance, but it marks a 42 percent jump for that generation from the same period last year.
But what do the youngest drivers in the market expect in an auto retail experience?
Only time will tell what they are seeking in a transportation model, said Jennifer Reid, Equifax's vice president of automotive marketing and strategy, but the backgrounds and budgets of these buyers will likely be key to unlocking the mystery.
"They are going to embrace the alternative options more than the traditional lease and purchase, more because that's how that generation grew up," Reid said. "But they still have some debt and time pressures when it comes to leaving home."
Like their millennial counterparts, Gen Z customers are coming to market with more debt constraints from student loans than previous generations, meaning they also will likely delay major purchases.
Still, dealers should take note of the ways in which they can serve these younger shoppers, particularly if they have thin credit files or budget constraints, to set them up as long-term customers. Investing in digital tools to source affordable inventory, connecting customers with affordable financing and educating customers about the purchase process before they come to the store are among the measures that will pay off for dealers as these buyers increasingly come of age.