Not too long ago, auto industry analysts were close to panic mode when it seemed to them that Millennials (those between the ages of 18-34) had little interest in car ownership. However, new data suggests that this just isn't the case. Millennials are taking out auto loans. However, the typical buying habits of young adults are different than those of previous generations.
Gen-Y Auto Loan Growth
While it is true that many Millennials enjoy using the services of rideshare companies like Uber and Lyft, many of them want to own their own vehicles. Most of these loans are going to older members of Generation Y (ages 26-34), and this makes sense because many younger Millennials are still finding their way into the job market and dealing with student debt.
Jason Barrie, vice president of market performance and F&I solutions at Dealertrack stated, "Millennials, defined as consumers aged 18 to 34, made up 35 percent of loan originations in 2015, and their share will continue to grow."
This may be good news for the auto industry because Millennials represent over 83.1 million American consumers, or more than a quarter of the country's population.
Barrie goes on to remark, "If you look at the scope of that size, it's the largest in U.S. history. This is what scares a lot of folks. Because it is such a large generation, the buying power is massive."
With this in mind, the auto industry is scrambling to maintain the interest of this huge consumer group. And car dealers are adapting to Millennial buying habits in order to keep them coming back to their dealerships. Many meetings have probably been called to discuss one burning question, "What do younger car buyers want?"
What Millennials Want from a Car Dealership
When it comes to the car buying process, certain consumer expectations are unlikely to change. In general, all customers want a good deal on a vehicle that suits their driving needs, budget and lifestyle. There are just a few characteristics that make Gen-Y car buyers unique.
- They favor longer loan terms. In order to get the vehicles they want while keeping their payments affordable, many younger customers opt for longer-than-average loan terms. In 2015, the average loan term for Millennials who purchased a new car was 70.2 months. Those who opted for used vehicles financed them for an average of 65.7 months.
Note: If you have a longer-than-average loan term and need extra protection, an extended service contract may save you a significant amount of money in repair bills down the road.
- They don't like to wait. Younger car shoppers seem to be a somewhat impatient group. According to a recent Autotrader study, 23% of Millennials are not willing to wait 10 minutes for a test drive. 22% believe that a 20 minute wait for paperwork and registration is too long, and 27% refuse to wait 20 minutes for financing answers.
- They want an interactive experience. When they get into a dealership, most Millennials are not interested in dealing with the "mundane" aspects of car buying, preferring to handle most of the process online. Face to face with a dealer, they prefer to be educated about their options and shown how they might benefit from certain features and newer technology. Instead of being "sold to," they wish to be actively informed.
As auto dealerships make changes to accommodate the demands of Generation Y, they may be doing a service to car buyers of every generation. If all customers can get a faster, more convenient and more interactive buying experience, than everybody wins.
Financing for Everyone
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