The dealer is still a vital part of the car-buying process, especially for younger consumers, according to the recently released Cars Commerce Industry Insights Report.
“The fact that 80% of Gen Z want to finish their transaction at the dealership is a really significant number,” Rebecca Lindland, senior director of industry data and insights at Cars Commerce, tells WardsAuto. “For us, it reinforces the idea that dealers are really valuable.”
In January, 80% of all consumers said they preferred to buy their vehicles in person, according to the report. The report notes 89% of Baby Boomers – those born between 1946 and 1964 – are likelier to prefer an in-person purchase.
But 80% of Gen Z – born between 1997 and 2017 – also prefer buying their vehicles from dealerships, although that group often purchases from online retail sites.
The most likely to purchase their cars online, at 16%, are millennials – those born between 1981 and 1984.
Cars Commerce finds that 59% of all consumers say it is important to touch, feel and test drive a car before purchase. That usually means going to a dealership.
A car is still most people’s second-largest purchase after a home, Lindland says.
“They want to know who they are doing business with,” she says. “There is an element of authenticity that you want to look the person in the face.”
The data also spotlights several other important insights about Gen Z buyers. Some of the key points include:
- Discussions with friends or family are their most-used car-buying information source.
- Gen Z buyers are more likely to have purchased a used car than any other generation.
- At 12%, this generation also is the most likely to have leased a vehicle.
More Affordable Options
The preference for leasing or buying used vehicles may reflect the high prices of new cars, but that may change. The number of affordable new-car options is growing, the report says.
In January, the report says entry-priced inventory, which Cars Commerce defines as costing $29,000 or less, rose by 63.1% compared to the same month in 2023.
Entry-priced inventory is still 79% below the January 2019 level, however.
Growing the number of affordable options faster faces multiple challenges, Lindland says.
“Vehicles are becoming more expensive because the safety requirements are growing. Also, manufacturers have to earn back their investment,” she says. “It is a combination of things that are driving prices up. It’s really, really challenging, but we are seeing a 63% increase in the entry-level market. It is just not back to where it once was.”
Respond Promptly to Consumer Inquiries
The average list price on Cars.com for a new vehicle in January was $49,096. That is down less than 1% compared to January 2023 and December 2023.
Vehicles currently sell far above manufacturers’ prices by one measure.
The Cars Commerce New Car Price Index (NCPI) estimates the total cost to purchase and finance a new vehicle, including estimated options, taxes, fees and interest for the entire loan term.
According to the NCPI report, the total cost to purchase and finance a new vehicle was down 3.3% in January, but it was still 32.7% above MSRP, the report says.
There are more vehicles to choose from now, however: Inventory was up 36% in January compared to the same month in 2023. That means a buyer’s market is returning, Lindland says.
For dealers, she emphasizes the need to respond promptly when a consumer is interested in a particular vehicle.
“Consumers have more choices now,” Lindland says. “Maybe that vehicle is available on someone else’s lot when it may not have been (previously). Be responsive and knowledgeable; we encourage dealers to have the same type of experience online and on the lot.”
