Gen Z are the most likely to pay for their car in cash

Half of Americans purchased their most recent car through financing

Across all respondents, 1 out of 2 purchased their most recent vehicle through an auto loan. Auto loans are the third largest consumer credit market in the United States, and Americans currently have a total of $1.4 trillion in outstanding auto debt.^[4] This is double the amount of loan debt 10 years ago, and it’s only expected to increase in the future along with rising auto prices. 

While half of respondents financed, a significant portion of Americans (38%) purchased their most recent vehicle in cash. The remaining respondents either leased their vehicle (7%) or received it as a gift (5%).

Gen Z is the most likely to pay cash

When we break down the data by generation, there are some stark differences in how people are buying cars. Members of Gen Z (those born between 1995 and 2015) are the most likely to pay in cash by a wide margin (45% of respondents). In fact, the majority of Gen Z acquired their last vehicle through cash or a gift. They were also by far the least likely to finance a car.

Gen Z is often characterized as preferring cash^[5] and being leery of credit cards^[6] and assuming debt, so in many ways this makes sense that it would carry over even to large purchases like vehicles. This younger generation understandably has less overall purchasing power, so they are seeking out less expensive vehicles. One source found that the average value of vehicle Gen Z was interested in was $19,800 — about half the value of their Gen X parents’ cars.^[7]

Gen X is the most likely to finance a vehicle

By contrast, Gen X was far likelier to finance a car with 58% of respondents having done so to acquire their most recent vehicle. Gen X and Boomers also were both less likely to have received their vehicle as a gift or to have leased it. 

Gen X has more purchasing power than Gen Z or Millennials; however, they also have higher credit scores and are less credit averse than younger generations.

Wrapping up

As buying a car becomes a weightier decision with climbing prices and steep competition, it’s interesting to see how different generations approach buying their next vehicle. 

And as the market shows no signs of becoming friendlier to car buyers, it will be interesting to see how Americans continue to find the resources to pay for necessary transportation.

Methodology

The Zebra conducted a consumer survey with panel provider Maru Blue from January-February 2022. The general population sample size was 1,200 and the by generation sample was 1,848. 

All participants had to be over 18 years of age, be a licensed driver and must have previously acquired a vehicle (cash, financing, lease, gift all satisfy).