75 Million Millennials (age 23-37) are predicted to account for 40% of U.S. new vehicle sales by 2020. According to J.D. Power millennials purchased just over 4 million vehicles in 2016, 29% of the new vehicle market. Millennials are the first generation to enter their teen years as Digital Natives. Digital Natives came of age with the internet.
Millennials rely on digital tools to facilitate social interaction and purchases. They communicate with friends and family via a host of instant message and chat apps. They buy airline tickets on Kayak, share the cost of a restaurant meal using Venmo and use Apple Pay to shop for fashion. They book vacation stays at Airbnb using a smartphone and find a date by “swiping right”.
This smartphone-enabled generation expects a fast, streamlined process that’s as close to friction-free as possible. Millennials are accustomed to a subscription or pay as you go style of transaction. Withholding payment information signals a retailer is not in tune with how this generation acquires the things that are important to them. Not having accurate, VIN specific payments on a dealer website makes it more difficult for members of Gen Y to get some of the most important information they require to select and own or lease a vehicle. This generation doesn’t negotiate, they compare.
It’s no surprise that programs offered through True Car, Costco and others continue to gain in popularity among all age groups including millennials. These programs promise a great value, transparent and upfront pricing and a fast, no-hassle experience. Costco alone facilitates the sale of over 400,000 cars annually.
These programs exist and flourish because dealers continue to withhold information and insist on herding potential customers through an outdated sales process. The irony is that rather than providing price and payment transparency directly to shoppers, automotive retailers are paying fees to Costco and others who then offer transparency on behalf of the retailer. Based on the popularity of these programs it begs the question: why don’t dealers cut out the middleman and offer transparent pricing and a hassle-free experience to all of their customers?
Millennials will soon be the largest segment of new car buyers. They value friction-free, mobile-enabled transactions. Transparent, hassle-free programs offered by third parties are gaining popularity. The unintended message dealers are communicating is that Costco is trustworthy, car dealers – not so much. Now is the time for auto retailers to align their business model with the needs of the first generation of Digital Natives. The alternative is to continue to pay Costco and others to do it for them.