Millennials and Gen-Z are changing the car-buying process around the world
So the question is how do we as institutions grab this audience that will make up 30% of the retail market in 2019 alone?
According to CallSource, millennial's are spending on average 17 hours researching the vehicle they want to purchase. Are you kidding? Who has 17 hours to research something? Well apparently they do!
The internet offers an array of options for millennial's today, allowing them to "Netflix and chill" while shopping for their desired vehicle. And the number of younger consumers visiting dealers is steadily decreasing because they do NOT want to negotiate in person with a dealer and feel as though they may purchase more car than they need.
Millennial's are all about helping businesses grow and strive to be more efficient and green. Local transportation, Lyft, and Uber have played a role in the down slope of vehicle purchases for the 18-34 year old's who want to make a difference.
Carmax offers the ability to find the vehicle you want, endless options to add, process your application online, and they will DELIVER THE CAR right to your front door. So I mean why not binge watch Game of Thrones on a Saturday and know that I can have my new to me BMW sitting in my driveway in less than 24-36 hours; pass the popcorn please!
And keep in mind that millennial's make up 73 million of the workforce today. This group, in addition to Gen-Z, the next generation, are just starting out. They have little to no credit and may have less than 6 months at their current employer. They're graduating college, landing a job that "may" let them use the major they just spent the last 4-6 grueling years working for, and they need a way to get to work.
So what does this mean for you?
Look for Other Ways to Approve Millennials and Gen-Z for Loans in their Car-Buying Journey
According to Defi Solutions, you might want to consider Alternative Credit Date, which "complements the information provided by the Big 3 credit reporting agencies." This might include:
Driver’s license and driving records;
Employment and income;
Real estate ownership and liens;
Bank accounts, bankruptcies;
Utility payment records – electricity, gas, water, mobile phone; &
Rental records – location, length of lease, payment history.
So the young person walking into your office, calling your call center, or filing out an online loan application may not have FIVE plus years working for the same company or a 700 or higher credit score. They may have little to no money to put down on the vehicle they're purchasing, and he or she may still live at home with Mom and Dad.
BUT... Did you know that statics show that no-hit-score borrowers actually will perform better then low score borrowers with a 30% default rate, where as low score borrowers have a 40% default rate. And according to the same Defi Solutions article:
"Applicants who have little to no credit history, but who do have steady employment, consistent or increasing income, address stability, and reliable payment history verified through alternative credit data present new opportunities to grow your loan portfolio without increasing credit risk" -
For some financial institutions this already means exploring more outside of the box ways to lend. Millennial's have done their research to make sure they're making the right decision on the car they are buying, so maybe it's time for lending institutions to let go of their conservative lending practices and take a chance on these kids.
And if they can easily book a flight, reserve an Air BnB, schedule an Uber, and book show tickets in less than 24-48 hours, then working with their local credit union, or community bank to apply for a car loan needs to be just as easy .
Fast and convenient, online-only options, shared widely on channels they frequent is the direction where your future growth will come from! So double down and open your minds and policies to this new younger generation of customers!
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