The Tide is Changing For Millennial Car Buyers
80 million Millennials have entered adulthood and have replaced Baby Boomers as the largest generation alive. Approximately 10,000 Baby Boomers are entering retirement each day, which expands the professional opportunities for adult Millennials as they continue to get into the workforce, marry, and have children, the major lifestyle milestone of financing an automobile becomes a looming decision.
Previously, in 2010, only 17 percent of new vehicles were purchased by Millennials, and as of 2016, only 60 percent of 18-year-olds owned a driver’s license in comparison with 80 percent in the 1980s. However, as discussed earlier, these statistics are changing. Among 16-34-year-olds, in 2015 almost four vehicles were purchased per 100 people per year, and these numbers rise to nearly seven among older Millennials. As Millennials continue to move in line with traditional lifestyle markers, they will need to visit the F&I department to facilitate these purchases, but how are their patterns around financial transactions impacting their F&I experiences?
A Preference For Easy Online Transactions
A 2016 study by LendingTree revealed that 33 percent of all loan requests came from applicants 34 and under, and nearly one-third of Millennials who purchased a new vehicle used residual-based financing. These findings should tell F&I professionals two things: Millennials are seeking auto loans at an increasing rate than previously thought, and this group handles a large portion of their financing and loan activity online. A study by Viacom Media showed that 73 percent of Millennials surveyed said they would rather handle financial services with Google, Apple, Amazon, Paypal, or Square. This group prefers to do their budgeting, financing, and banking online, and this is no different when it comes to the auto lending and financing process. The challenge is that many F&I departments still require a lengthy paper-work ridden process, but a new generation of car buyers is seeking a new way to alter this.
F&I Could Be The Gateway To Other Financial Transactions
Other than the purchase of a home or navigating student debt, it is likely that the car will be the most significant financial commitment for a Millennial. It is the gateway to additional loans, but this also means F&I professionals need to be aware that these may be their first dealings with credit and banking and need to acknowledge that Millennials may have a heavier need for information. They are used to browsing ratings for products and conducting thorough research about purchases large and small. The traditional processes of F&I are not always conducive to providing the transparency and level of information this group would like to see before arriving at a dealership. As a result, various companies have caught on to address this issue with a mobile solution.
Mobile Applications Answer The Call
JPMorgan Chase and TrueCar partnered to consolidate the auto financing and online car buying process. If a consumer is pre-approved on the app, they are referred to an affiliated dealer who will already have their financing documents upon arrival. This eliminates the wait and the possibility of being turned down after a long test-driving and in-house application process. Another app that has jumped into serving this group is AutoGravity. It allows consumers to compare auto loan options across various companies and eventually secure one if they choose. Banks and automobile e-commerce sites are recognizing the importance of fast and efficient ways to bypass the traditional F&I process.
What Can Dealers Do?
A recent study by FICO of 1000 car buyers over the age of 17 revealed that 61 percent would either rather make a full cash purchase or work through credit unions and banks then work with F&I offices. While this may be a troubling trend, all news surrounding the financing office is not abysmal. A Cox Research study showed that 63 percent of all shoppers (including Millennials) would purchase F&I products if they knew about them ahead of time. So, the group is open to further working with these departments. Here are three other things dealers can do to encourage Millennials to use F&I:
- Consider becoming affiliated with a Chase and TrueCar type program – This can help connect with millennial buyers and speed up the financing process to get rid of any idle time or delays.
- Provide as much information about the process in the beginning – As stated above, 63 percent of car buyers said they would purchase F&I products if they knew about them ahead of time. Think about providing brochures as customers enter the dealership or post links to a blog post detailing the process on social media.
3. Offer advice and as many detailed analytics as possible – Since some Millennials may be new to the car buying process, remind them that you are open to any questions they have and use technology to bridge the gap. Utilize simple graphs and analytics to clarify all F&I options.