By Ray Birch
ONTARIO, Calif.—The thinking that many Millennials and Gen Xer’s don’t want to own cars is flawed, says CU Direct, which says data show these younger consumers will soon pass Baby Boomers as the primary car-buying segment.
Bob Child, COO of CU Direct, says it’s time credit unions shift the focus of their auto loan marketing away from the deep-pocketed Boomers and toward Millennials and Gen X.
“I was recently looking at data from Experian that shows the percentage of loans bought by Baby Boomers, Millennials and Gen X, and what I saw was very interesting,” said Child.
He said the data reflect the auto loan purchases by a number of demographics from 2014 to 2018.
“You can see by the growth curves that by 2020 Millennials and Gen X will take over from Boomers as the primary buyers of auto loans,” he said. “The reality is that in 2020 the youngest Baby Boomers will be 56, and many are retiring and slowing down on their car-buying purchases. And the other reality is that 2020 is not far away—in two years a different demographic will be in charge.”
Time to Rethink
Child said credit unions must rethink how they attract auto loans, and move more toward digital media.
“They have to advertise more on mobile, on their website—they have to move more online,” said Child. “I think a lot of credit unions are still comfortable with the old ways to advertise for auto loans and to pick up loans through dealers—which is still very important.”
The shift in auto buying power places an even greater need on credit unions offering online lending that is swift and easy to use, as well as car buying websites that take a prospective buyer from the initial shopping phase, to finding their car and securing their loan.
“Millennials and Gen X want a lot of information. So your car buying sites need to help them find the best deals on cars, help them understand the interest rates and determine monthly payment…,” Child said.
Pivotal Point
Child sees this as a pivotal point for credit unions in auto lending. With more fintechs offering simple and easy ways to get loans online, if CUs don’t match these efforts they could lose a lot of younger car buyers, he said.
“You have to make your processes easier. Make preapproval easier. Make it simpler for Millennials and Gen X. Find ways to make it easier at the dealerships to close on a credit union loan, because we all know how painful the experience can be with the finance person at the dealer.”
Other Trends to Watch
Additional industry trends from CU Direct’s recent data:
- New car sales should approach 17 million units by the end of the year, and hover at about 16.7 million in 2019 and 2020
- Leasing may have peaked in 2016 (31.4% of new car sales); expected to end 2018 at 30.3%
- Credit scores among new and used buyers have steadily increased since 2014
- Average car prices for credit union car buyers is at record levels: $30,958 for new and $19,708 for used
- CU auto loan rates are rising, up to 5.76% for new and 9.40% for used