David Jacobson, GrooveCar
HAUPPAUGE, N.Y.—One automotive lending expert sees leasing as a good way for CUs to beef up their loan portfolio as well as the percentage of Millennials within the membership.
David Jacobson, president of GrooveCar, said that Millennials, in quickly growing numbers, are turning to leasing as an affordable way to buy a new car that has the latest technology and gadgets.
“It used to be that when young adults bought cars that technology was not a concern,” said Jacobson. “They got a little help from their parents, got a four- to five-year-old car, and a loan that went out for a while.”
But Millennials are “all about technology,” said Jacobson. “It is a major part of their lives. They want Bluetooth in their cars, all of the newest features like backup cameras, satellite radio, and to be able to get the Internet through their dashboard. They want the newest of everything, just like their phones. This is forcing them to buy new cars, which are more expensive.”
No Money Down
Millennials often don’t have a lot of cash to put down to buy a new car, and the lower lease payment of around $250-$350 fits many of their budgets. “Millennials are not looking for luxury in their cars,” said Jacobson. “They don’t care about performance and horsepower. They want transportation.”
That, as well as price, is steering them to entry-level compacts and sub-compacts, and occasionally mid-sized cars, said Jacobson. “So Honda Civics, a Hyundai, Nissan
Altima . . .”
Turing the car over, too, is quicker with leasing than purchasing, noted Jacobson, who said selling or trading in a new car in three years tends to be expensive with depreciation. “With leasing, in two to three years Millennials get a new car with all the updated technology.”
Manufacturers increasing their TV advertising for leasing is fueling Millennial’s interest, as well, said Jacobson. “More Millennials are aware and educated about leasing because of the promotions. When they walk into a dealership, they likely do not have buying a car on their minds.”
With leasing, auto upkeep isn’t complicated, added Jacobson. “Millennials like to keep things simple. They don’t want to worry about fixing their car when it breaks down. And, it’s $100 an hour to repair a car today. The lease warranty covers a three-year term. Anymore, cars to Millennials are like appliances. When you buy an appliance you want the cheapest way to own for the shortest period of time so you can upgrade quickly.”
GrooveCar, which offers the CU Express Lease product, said leasing continues to grow among its credit union clients. Last year GrooveCar posted record leasing numbers for the company and is on track, after the tough Northeast winter, for another strong year, said Jacobson.
“Ninety percent of our leases are to new members,” Jacobson pointed out. “Which presents credit unions with a big opportunity to add new, young members. But credit unions need to be at the point where Millennials are doing their business. They have to have indirect leasing programs.”
CUs Getting Back Into Leasing
CUs also have to advertise to the membership and the community that they offer indirect leasing, and tell people to ask for the credit union’s financing when they visit local dealerships, Jacobson advised.
CUs in recent years have hesitated to get heavily involved in leasing. But Jacobson said that is changing as credit unions realize leasing is important to the lending business model.
“Credit unions are not saying time has passed and it’s time to jump back in. They realize how critical leasing is to remain competitive at the point of sale,” said Jacobson. “And, here at GrooveCar, we have been seeing very good results for a number of years now with our member-friendly leasing model that leaves no burden on the back of credit unions when the car is turned in. Credit unions are recognizing this.”