Changing Lanes: Millennials, Cars and Consumer Loans

by Marci Francisco
Changing Lanes: Millennials, Cars and Consumer Loans

There is no doubt that the retail world is undergoing a period of rapid change as brick-and-mortar staples face mounting pressure from dynamic internet retailers for market share.  This is even more evident in the auto industry as we move into the fast lane of online retailing, and this change is heavily influenced by the power of the trendsetting Millennials today.

People in the millennial generation – those born between 1980 through 2000 – have come of age in a state of rapid change. Their world evolved at a staggering rate, driven by advances in technology that brought a vast world into their backyard.  In addition, this is the largest generation in the United States’ history, composed of approximately 80 million consumers.  They are true digital natives, connected to each other in ways previously not seen.

The “always on” millennial consumer frequently shares ideas and opinions with their peers – and the world – through social media, and can become a strong advocate for (or against) your brand, if they care enough about you to do so.  In addition, many of them are more burdened with debt than previous generations, as the millennial segment was impacted at a higher rate during the Great Recession than other age segments since many had just begun to enter the labor market.  Carrying higher levels of student debt, their finances often have been impacted by lower employment levels, slow job growth and smaller wage growth.

As wage growth still remains slow, a growing number of Millennials have delayed major milestones in life: marriage, having children or purchasing a home.  This has caused great concern for many experts in the auto industry.  As recently as 2013, studies cited that 30% of Millennials surveyed did “not intend to buy (a vehicle) in the near future” and another 25% stated that they were “indifferent” to a car purchase.* Conventional wisdom held that vehicle ownership was not important to Millennials, and as a result, auto makers were in trouble.  The prevailing opinion was that we would be moving to a “sharing” economy, defined by on demand services such as ZipCar, subscription based options like Car2Go or other peer-to-peer car services.  But this generation continues to defy any stereotypes.

Flash forward to 2015.  Millennials are buying cars and buying a lot of them. In 2015, they account for over 28% of all retail vehicle sales.  By 2020, experts predicts that Millennials will account for more than 40% of new vehicle purchases, and when combined with Gen X, will buy 4 out of every 5 new vehicles.  This aligns with what we’re seeing in the credit union space.  Today, this age group/segment represents the largest segment of auto loan originations through CU Direct’s CUDL platform, averaging $664.1 million per month in 2015 alone: an increase of almost 5 percent from the same period last year.  And with their economic power on the rise, this trend should only accelerate.

Millennials look for value in their products, often purchasing compact cars packed with technology or loans and vehicle protection options with attractive terms. They also research financing options online at higher rates than the general population, and are open to influence when looking at potential lenders. Why does it matter?  Millennials are the future, as they’ll be purchasing – and financing – vehicles for the better part of the 21st century. They represent immense opportunity in the short and long term, and wield tremendous buying power.  Each year, they spend approximately $600 billion on retail purchases and are predicted to increase that to over $1.4 trillion annually as soon as 2020. With their personal income set to account for over 46 percent of the whole by the year 2025, there’s a lot of potential for credit unions as we look for future growth.

The millennial buyer needs an auto loan. They expect companies to connect in new ways, and brands that truly embrace the mobile and digital revolution are likely to thrive with this generation of car buyers.  So, here are some of the key strategies to consider as you look to connect with this vital and thriving segment.

Evaluate your online experience.

When shopping for a car, the digital experience matters.  A full 96% of consumers leverage online research to search for a vehicle, while 75% of all shopping time is spent online1. Consumers spend over 14 hours sifting through information on multiple devices as they narrow down their search. And for Millennials, online means mobile, as they are more likely than others to shop for cars on a mobile device or to cross-shop at the dealership, and often prefer texting to a phone call.

Credit unions should continually ask themselves if their online experience is better than that of its competitors’.  Is your CU’s website streamlined, easy to use and sophisticated?  Is it mobile-friendly?  Members will use third-party websites to shop for a vehicle. Do you offer a tool?  If not, consider one.  If you do, is your partner promoting their brand or yours?  Can members easily see that you can help them find (and finance) a vehicle when they visit your home page, log in to home banking or view your mobile site? Can your members connect with your credit union in one click to ask a question or inquire about a loan, or do they need to fill out a lengthy form to get information?  Your site may help or become a barrier.

Looking at lending through a digital lens

Millennials have been trained by online retailers to expect great information, a fast buying experience and overnight delivery. How can credit unions meet these expectations?  When marketing your auto loans, a focus and priority needs to be placed on a number of factors, including transparent information, ease of application, speed of response, and a streamlined process, to attract the millennial shopper/buyer.  And it should be a priority to ensure information about your product offering and services is clear, simply displayed on your website, and easy to understand.

Auto manufacturers and dealerships place online payment and quote tools front and center on their sites to attract shoppers and gauge their purchase intent as loan application leads tend to close at a higher rate in the industry than vehicle leads do.  To help retain opportunities, your credit union should prominently place payment calculators within your site, and even consider home page placement if you’re actively seeking to grow auto loans.  Make it easy for members to start the application process, even if just asking for enough information to get the ball rolling and make that connection. Also, be sure to evaluate how much of your lending process can be managed through digital channels before moving to a more traditional one at the branch or the dealer. Ultimately, regardless of your process, keep the lines of communication open and provide proactive and frequent updates as to the status to keep the millennials engaged.

Millennials do care about cars and need auto loans.  They are looking for a direct connection – that life in the fast lane4 kind of experience — when they purchase and finance their next car.  Auto shopping is already an online experience, and auto lending isn’t far behind.  Is your credit union ready, because the future is here.


CU Direct’s AutoSMART and AutoPREMIER programs help credit unions streamline the car shopping and buying process for members, making it easier to locate and finance their next vehicle.  Discover how these programs can increase loan growth, member retention and engagement, and promote your brand.

(*A version of this article first appeared on the CUNA Credit Union Magazine website on January 12, 2016) 

About the Author

Marci Francisco
Marci Francisco is the Vice President, Automotive Marketing & Business Development, for CU Direct