CHICAGO-Older buyers are expected to dominate the bulk of auto sales this year, but the preferences of younger consumers are changing the car-buying process in major ways.
Those projections are based on comments from a quartet of experts who shared their insights at CU Direct Lending's (CUDL) conference during a session on "The Inside Scoop on the Auto Industry."
The panel was moderated by Ed Lapham, executive editor of Automotive News, who noted that 2012 is expected to be "a pretty darn good year" for sales. He cited a recent AARP statistic that said that 60% of new autos sold in this country are going to consumers age 50 and older. Many of the panelists echoed that statement, but Mirt Ramey-of Red McCombs Auto Group in San Antonio-added that many baby boomers who are buying cars right now are doing so on behalf of younger family members.
One thing those younger consumers bring to the car-buying process, however, is increased product knowledge. All three panelists agreed that most consumers already know what they want by the time they hit the dealer lot-and they've not only done their shopping for specific make and model, but they've shopped on price and rate, too. That makes for a faster, easier transaction with a lot less negotiating, said Andy Crews, president and CEO at AutoFair Group in Manchester, N.H.
"The big question for most consumers is how their credit score affects their rate," said Crews. But he was also quick to add that while rate is important to buyers, recent economic factors have made APR secondary to the monthly payment and how it affects the buyer's budget.
Friending Car Buyers
Younger consumers are also interacting with dealers on Facebook. Crews noted that sales staff can reach out to generate leads via social networking, but said that strategy doesn't work for dealers or manufacturers. He noted GM's recent announcement it has stopped advertising on Facebook because it hasn't been seeing a return.
Ultimately, continued Crews, Facebook and social networking have brought auto buying back to a small-town feel, with users communicating their experience and helping dealers generate leads via word-of-mouth referrals.
In addition, said Crews, the Internet has accelerated the process to the point where time is now more important to potential buyers than money. They want speedy transactions and they've already done a lot of their research in advance, so sales staff are often placed more into the position of serving as product specialists rather than pushing to make the sale.
Matt Hanson-financial director at Northwest Motorsport in Puyallup, Wash.-added that his shop is seeing an increased number of pre-approvals "because the Internet is creating more and more educated buyers."
The bonus for the dealership is that it eliminates one step of the sales process and makes the whole transaction quicker.
What's Driving Sales
Despite strong expectations for sales in 2012, panelists also agreed that if it weren't for financing options, most car buyers wouldn't be buying. Cash buyers are rare these days, and Crews noted that at least 80% of his business is dependent on financing. Hanson said that the "biggest change of the last 10 years is the ability of credit unions and dealers to more closely work together to make it a one-stop shopping experience for customers."
Panelists also stressed the importance of close dealer/CU relationships. Crews emphasized that having credit unions in the shops to work with F&I managers is crucial to helping each party understand both the CU's niche and the dealer's niche. "If they can understand how your credit union lends ... then they can structure those deals better," he said.
Hanson pointed out that there has been comparatively little turnover at many dealerships since 2007, along with more dedicated CU reps, both of which have helped stabilize and maintain dealer/CU relationships.
