New research by TransUnion, one of the Big Three credit bureaus, debunks a couple of modern myths about the car-buying habits of millennials, the generation of 18- to 34-year-olds so coveted by most marketers.
The myths are that the generation isn’t interested in driving or in cars, and that millennials can’t afford cars anyway because they have too much student debt.
The credit bureau’s research results are very good news for auto dealerships and lenders, alike.
First, millennials are actually the fastest-growing group in autos, according to TransUnion, even though they have a reputation for being more interested in mobile devices than in automobiles.
After a late start – probably because of the Great Recession and not because of any great, lasting shift in attitude – millennials are starting to buy cars and get auto loans like previous generations did, said Jason Laky, senior vice president and automotive business leader for TransUnion.
Specifically, the credit bureau said millennials accounted for 27 percent of auto loans and leases in 2014, up from 16 percent in 2009. Their average opening loan balance grew 4.1 percent year over year, to $18,678 in 2014, from $17,942 in 2013, TransUnion said.
“The growth in millennials’ auto loan originations dispels the common myth that millennials are not buying cars,” Laky said in a written statement.
Second, TransUnion also said in a separate study published in May that student loans accounted for only a slight delay in auto purchases, despite some analysts worrying that heavy student loans could prevent young buyers from stepping up to a new car or truck.
In the long run, TransUnion said, consumers with student debt are actually more likely to have an auto loan than consumers with no student debt. Not only that, consumers with student debt perform better over time in terms of losses and delinquencies, TransUnion said.
“This is an important finding, because it shows lenders that rather than being concerned about student loan borrowers’ ability to manage new credit, this may actually be an attractive marketable group, both in terms of higher credit demand as well as potentially better repayment performance,” said Charlie Wise, co-author of the study and vice president in TransUnion’s Innovative Solutions Group.
“Lenders looking to attract and maintain relationships with millennials should find this news encouraging,” he said.
– Royal Media