Those top-line numbers hide generational tumult, however. Older, traditionally minded car buyers dominate purchases, but younger consumers are bringing a fresh mindset to market. Here are three trends that manufacturers and dealerships will have to reckon with as millennials and Gen Zers take their place at the marketplace steering wheel.
The future is online
Younger car buyers are doing it differently. While 61% of Americans got their vehicle from a dealership, that figure drops sharply for Generation Z (35%) and millennials (45%). Indeed, Gen Xers report almost twice as often as Gen Zers that they bought from a dealership (66%) and baby boomers report more than twice as often having done so (79%). Conversely, majorities of Americans under 57 (54% of Gen Z, 57% of millennials and 55% of Gen X) are comfortable buying from an online-only dealer. With only 29% feeling comfortable, baby boomers account for the overall national split.
Where are younger consumers buying their cars? While only 6% of Americans said that they had bought directly from the manufacturer (online, in other words), that figure stood at 14% for Gen Z and 11% for millennials (as opposed to 4% for Gen X and 1% for boomers). A less-pronounced but still notable trend emerged regarding online-only dealerships such as Carvana and Vroom (which recently landed in the top-20 performing brands among Gen Z): While the percentage of Gen Zers (5%), millennials (6%) and Gen Xers (6%) who have used such platforms is in line with the general population it’s markedly higher than among baby boomers (2%). It is little wonder that the global, online auto market is exploding. Estimated to be at $237 billion in 2020, it’s projected to reach $723 billion by decade’s end.
Design thinking, a business strategy that prioritizes the consumer experience, has seemingly penetrated every aspect of commerce—except car-buying. While every other sector has sought to eliminate friction and promote seamlessness between online and in-person shopping (think Amazon and the Apple store) car dealers have dragged their feet, often enjoying complex legal and regulatory protections that have insulated them from pressures to change.