Many Generation Z car buyers have access to enough cash to buy a new vehicle. But it’s not necessarily their own money.
A CDK Global survey asked 1,000 new-car buyers how they finance their purchases. Including all age groups, 29% say they paid cash as opposed to taking out a car loan with monthly payments.
“It surprised me it was that high,” Dave Thomas, director of content marketing and automotive industry analyst at CDK Global, tells WardsAuto.
Here’s the breakdown:
Forty-seven percent of the youngest generation — “Zoomers,” the oldest of which are in their mid-20s — say they paid cash for a new vehicle. More of them did that than any other surveyed generational group.
So-called “young” millennials (late 20s and early 30s) were next highest to bypass the car-loan route at 27%, followed by Baby Boomers (the older ones closing in on the big 8-0) at 22%; midlife Generation Xers at 20%; and “old” millennials (late 30s and early 40s) at 16%.
Auto retailing is one of the most credit-intensive industries in the U.S. with more than $1 trillion in outstanding car loans, according to credit tracker Experian.
Is the CDK survey indicating young, often first-time car buyers possess more money than their elders? Not necessarily. If anything, it suggests most of them are getting some family financial aid at the dealership.
“When we look at these numbers and connect the dots, it indicates another person is involved in the transaction,” Thomas says. “The assumption is that it’s a parent.” (Or even a grandparent.)
The survey stayed with the hard data and didn’t delve into the personal lives of the people polled. Thomas acknowledges he’s presuming moms and dads are opening their wallets for junior’s new car.
Then again, Gen Z is becoming a financial force as more and more of its members grow up and become car consumers.
“Zoomers are joining the workforce by the tens of millions,” Thomas says. “They have $3 trillion in purchasing power.”
And they’re not done yet, with the youngest of them approaching the pre-teen years.
Still, the CDK survey suggests many Gen X parents are covering their Gen Z kids’ auto purchases.
That’s ironic because when they were younger, many older people branded members of Gen X as “slackers.” Now luxury auto brands such as Lincoln specifically market to them.
And remember when the millennials were younger, and the rap against them was that they weren’t interested in owning a car?
That turned out to be a non-issue.By 2020, millennials were buying more new cars than any other age group, accounting for 32% of total new-car sales, topping Baby Boomers for the first time, reports market research firm J.D. Power.
Former Ford futurist Sheryl Connelly says early research indicates many Gen Z members are more frugal than other generations. Yet, about 75% of polled people across all generations consider vehicles necessities.
“That’s good business news,” Connelly notes during an online presentation.
Zoomers who pay cash for a new car obviously aren’t borrowing from their nascent 401(k) retirement plans, says Gasman Solutions’ Justin Gasman, a finance and insurance trainer and a former finance director at a dealership in Boulder, CO.
“But they are getting the money from somewhere,” he says. “Maybe grandma. We don’t know. We’re not at the kitchen table when they are discussing finances.”
Every up-and-coming generation spends time in the barrel, taking digs from people who are older than them. Zoomers are the latest age group to take a spin.
“I don’t want to pick on Gen Z, but they lack real-world experience with practical reality. They may know how to do online research but when it comes to buying a car, many of them don’t have a clue. Buying a car fully online? That’s ridiculous," says Gasman.
If there is such as thing as a “youth car,” it’s a used car. But even a young adult buying a pre-owned vehicle may need parental financial help.
