Contributing Author: Steve Klees, Senior Vice President, Specialty Channels, EFG Companies
When you hear the term “Millennials” paired with the term “car,” what comes to mind? Do you automatically think, “Millennials aren’t interested in cars?” For the past few years, it seemed like a new article was published every month stating that the reason Millennials weren’t buying cars was due to personal preference.
Today, economics has proven that assertion false. According to J.D. Power & Associates, Millennials (those born between 1980 and 2004) accounted for 27 percent of new car sales in the U.S. last year. Millennials have already surpassed Generation X to become the second-largest group of new car buyers after Baby Boomers; and each year, the influence of the Baby Boomer generation recedes and Millennial buying power increases.
It turns out, personal preference had very little to do with Millennials approaching the auto industry. Rather, it had all to do with the economy, the job market, and wage growth. Most of the Millennials with buying power today entered the job market during the economic upheaval in the Great Recession. Because of the lack of prospects, some returned to school, while others moved in with parents or got roommates and stuck it out in low-paying or part-time jobs that did not utilize their post-high school training or education.
Now that the economy is steadily expanding, the job market is improving and wages are going up, more Millennials have greater ability to buy a car, buy a house, get married and have children. So, before you write off this generation, think again about how their growing buying power can affect your institution. Appealing to the Millennials controlling today’s purse strings can significantly boost your loan volume. In fact, according to FactorTrust, an analytics company that provides underbanked consumer data and risk scoring solutions to lenders, Millennials make up the largest percentage of non-prime auto applicants at 43 percent.
Think about these non-prime Millennial consumers today, with most likely a steady job and a recovering credit score, and how their needs will change in the next 10 to 15 years. By cultivating a relationship with them now as non-prime consumers, you can grow your business with them over time as they improve their credit, trade in used cars for new, buy homes, and slowly increase their reliance on your institution in other areas of their lives.
But How Do You Appeal to This Generation?
Many articles out there say, “Go Green,” “Show Community Support,” or “Be About Something.” While all these slogans are well and good, they don’t touch the crux of what Millennials are looking for. Rather, they are just platitudes based on generalized assumptions.
Because the Millennials entered adulthood during one of the worst recessions in U.S. history, their relationships with brands and companies is very different from Generation X and Baby Boomers. You have to gain their trust in order to gain their business, and their trust is hard-won. Millennials saw parents and siblings lose jobs, lose homes, and lose cars during the recession, and the thought at the front of their mind is “I don’t want that to happen to me.”
That thought is the reason why they held off on hitting adulthood milestones, and that thought determines how they evaluate the pros and cons of making big-ticket purchases like cars and houses. This generation wants more value for their money; they want vehicles they can hold on to for a long time, if necessary; and they want to be safeguarded from uncertain eventualities.
One strategic way of appealing to Millennials is by structuring your loans with complimentary F&I products, like a vehicle service contract (VSC) or vehicle return protection. These products protect consumers from unforeseen circumstances that can negatively affect their ability to make their car or house payments. For example, a VSC gives consumers more control over their monthly budget by taking care of unexpected expenses related to a vehicle breakdown. 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.
Offering F&I products on your loans that appeal to this generation will also help your dealer partners as they struggle to become relevant to Millennials. It will differentiate their offering and give them the opportunity to increase profit through the sale of upgrades.
EFG Companies has been innovating consumer protection products for close to 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.