According to The Center for Generational Kinetics, Millennials are now the largest generation in the U.S. workforce, and the fastest-growing generation of customers in the marketplace. Though their numbers are strong, their financial situations are not. While there are certainly exceptions, Millennials are launching their lives later, often strapped with burdensome student loan or other debt, with lower or missing FICO scores, and a history of postponing large financial purchases. Couple these challenges with Millennials’ demand for high tech/low touch encounters and auto lenders have their work cut out for them.
As the Internet has grown up, so have Millennials. This means that as the Internet became more sophisticated, providing immediate access to everything from encyclopedias to fast food delivery, this demographic has become accustomed to immediate gratification through impersonal communication.
In addition, this generation has the greatest level of student loan debt in the country’s history, and it’s rising because wages have been stagnant for several years. According to the Project on Student Debt, 68 percent of 2015 bachelor’s degree recipients graduated with an average student loan debt of $30,100 per borrower. The debt load not only affects the amount of savings they have for purchases and down payments, it also greatly impacts their credit scores.
This is one of the biggest reasons why Millennials have put off the milestones of adulthood. They simply can’t afford to move out of their parents’ homes, buy cars, get married, buy houses, and have children. Saddled with debt yet striving for success, Millennials also face another challenge. According to a PwC survey, only 24 percent of Millennials surveyed could demonstrate basic financial literacy. In another survey of Millennials already saving for retirement, a third said they were “not sure” how their money was invested. Not knowing the nuts and bolts of money matters can hurt Millennials’ personal financial prospects – as well as their ability to successfully negotiate loan terms for a car purchase.
The good news is this generation is eager to learn and will seek help. The PwC survey found more than 70 percent of Millennials believe personal finance is an important subject to learn. Credit unions should embrace this opportunity, but deliver the content in a straightforward fashion and meet Millennials where they are – online. Provide basic information in blog form, on social media, and on your site. Offer an online chat feature with a knowledgeable in-house resource.
While Millennials are eager to dig themselves out of debt and get on the road to financial stability, they are still financially fragile. According to a Washington Post survey, 63 percent of Millennials would have difficulty covering an unexpected $500 expense. In the survey conducted by PwC, nearly 30 percent of Millennial respondents reported that they were regularly overdrawing their checking accounts. Because of this, more young adults are turning to payday loans to get by, a recourse that can end up putting them deeper into the hole.
Help this generation get in a better financial situation by structuring your loans with complimentary consumer protection products, like limited powertrain or vehicle return protection, that protect their budgets. These products protect consumers from unforeseen circumstances that can negatively affect their ability to make their car, rent or mortgage. For example, powertrain protection gives consumers more control over their monthly budget by taking care of some of the largest expenses related to a vehicle breakdown, the engine and transmission. Meanwhile, vehicle return protection offers consumers a safety net to relieve their lease or loan obligation when unforeseen life events occur, like:
- involuntary unemployment;
- physical or mental disability; or,
- critical illness, etc.
How can a credit union capture this challenging, yet potentially lucrative demographic? A consultative relationship with a knowledgeable loan officer can not only result in a mutually beneficial auto loan, this relationship can bear fruit offering other consumer protection products.
EFG Companies has been innovating consumer protection products for more than 40 years. We know how to keep you relevant with the current generation with F&I strategies that target the concerns of today’s consumers. Contact us today to find out how.