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. This change is heavily influenced by the power of the trendsetting millennial generation.
People in the millennial generation—those born between 1980 and 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 U.S. history, composed of approximately 80 million consumers. They are true digital natives, connected to each other in ways previously not seen.
These “always on” millennial consumers frequently share ideas and opinions with 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 millennials are more burdened with debt than those in previous generations because many entered the labor market during the Great Recession.
Carrying higher levels of student debt, their finances often have been affected 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 homes.
This has caused great concern for many experts in the auto industry. As recently as 2013, studies revealed that 30% of millennials surveyed did not intend to buy a vehicle in the near future, and another 25% said they were “indifferent” to a car purchase.
Conventional wisdom held that vehicle ownership is not important to millennials, and as a result, automakers 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 stereotypes.
Flash forward to 2015. Millennials are buying lots of cars. In 2015, they accounted for more than 28% of all retail vehicle sales, according to the J.D. Power 2015 New Auto Shopper Study.
By 2020, experts predict millennials will account for more than 40% of new vehicle purchases and, when combined with Gen X, will buy four of every five new vehicles.
This aligns with what we’re seeing in the credit union space. Today, this age group represents the largest segment of auto loan originations through CU Direct’s CUDL platform, averaging $664.1 million per month in 2015 alone.
That’s an increase of almost 5% 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 in addition to loans and vehicle protection options with attractive terms.
They also are more likely than the general population to research financing options online, and they’re 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. That amount is expected to increase to more than $1.4 trillion annually as soon as 2020, according to Accenture.
Millennial buyers need auto loans. 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 two strategies to consider as you look to connect with this vital and thriving segment.
1. 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 online.
Consumers spend more than 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. Plus, they often prefer texting to a phone call.
Credit unions should determine if their online experience is better than that of competitors.
Is your credit union’s website streamlined, easy to use, and sophisticated? Is it mobile-friendly? Members will use third-party websites to shop for a vehicle.
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?
Based on your answers, your site may help millennials—or become a barrier.
2. Look 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, place a priority on a number of factors, including transparent information, ease of application, speed of response, and a streamlined process, to attract the millennial shopper/buyer.
Ensure information about your products 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. 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 you’re simply asking for enough information to get the ball rolling and make that connection.
Also, evaluate how much of your lending process can be managed through digital channels before moving to a branch or the dealer. Ultimately, regardless of your process, keep the lines of communication open and provide proactive and frequent updates as to the loan status to keep millennials engaged.
Millennials do care about cars and need auto loans. They are looking for a direct connection—that life in the fast lane 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?