Car buying is changing as the new generation of young adults – millennials – steer away from making big purchases outright and choose instead to rent, lease or use finance options. Consumers now spread out paying for a vast array of possessions over months and years – from mobile phones to furniture, holidays to education. Mortgages have long been available to buy homes, of course, as have finance packages for cars.
Over 80% of car sales in the UK are now made with finance, according to The Guardian. This presents opportunities for car retailers; not only to offer innovative and competitive finance deals but to create new ways to market with financial add-on products. GAP insurance, for example, can help protect customers in the event their vehicle is written off, as they can avoid paying off a loan for a car they no longer own. For millennials with little in the way of savings to buy a vehicle outright, GAP insurance can provide a lifeline that enables them to purchase another car on finance, without paying off their original vehicle at the same time.
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The changing face of car sales
New finance issued by car dealerships has more than doubled in the past five years, with over £30 billion in credit distributed by auto finance dealers in 2016 alone, according to figures from the Finance & Leasing Association. As a result of rising consumer credit, mortgages and student loans, UK household debt has risen by 7% in the past five years.
This mounting debt has meant fewer millennials can walk into a dealership and pay forecourt prices. Many have been put off car ownership entirely or even gaining a driving licence. According to government statistics, the proportion of 17-20 year olds with a licence has fallen from almost 50% in the 1990s to below 30% today. And the percentage of 19 to 34 year olds who do not own a car has risen from 28% in 2009 to 40% in 2015, according to the Good Rebels consumer experience report.
However, there are some positives among millennial car buyers. Nearly 50% of 17 to 24 year olds are open to buying a new or used car, according to an AutoTrader survey of 2,000 consumers. The same survey found that 48% of young consumers intend to buy a car on their first visit to a dealership. However, only 9% claim to visit a retailer to browse models, and over a third discount visiting as part of their research into which car to buy. Car retailers must, therefore, ensure their online presence is as effective and efficient as their forecourt sales team.
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How car retailers should be selling to millennials
Clearly, having the right car finance deals in place is essential for the new generation of buyers. As discussed in our digital technology for dealerships eBook, car retailers’ websites, online reviews and social media presence are also an important part of attracting millennials to the forecourt in the first place.
With the majority of buyers signing up to multi-year deals that are likely to prolong their relationship with their car retailer, offering to protect their investment with financial add-on products can also help boost sales, retention rates and customer satisfaction. Any high-quality product that can potentially save car buyers’ money in the long run can be an effective way to boost revenue. It is vital, however, that dealers discuss each customers’ personal requirements when it comes to financial aftercare products, to ensure they are getting the right support.