Millennials are Moving Out of the Basement, with Better Credit and More Purchasing Power

Millennials are increasing their share of credit segments above Subprime, and are consistently racking up more approvals. In the Subprime segment alone, those approvals are over 66%.*

In every corner of the dealership, change is afoot, much of it inspired by Millennials. They’re becoming the primary consumer, and they routinely reject traditional retail practices, the things salespeople have done for decades. Their preference is to gravitate toward dealerships that apply an online to in-store process – a blend of digital access, mobile convenience and showroom connectedness that’s more than just talk. These digital natives have natural expectations, habits that are shifting the automotive retail business toward a true online deal-making experience, with digital efficiency built into showroom workflows. In fact, according to Cox Automotive’s 2017 Car Buyer Journey, Millennials spend more time shopping, equally consider new and used vehicles, and are less than pleased with the dealership experience.

None of which should surprise anyone.

What’s eye-opening is their emerging financial influence. Dealertrack credit data shows a clear trend: As Millennials get more established professionally, Subprime numbers are dropping, accompanied by a higher percentage of Super Prime/Prime credit spectrum volume. In fact, when Dealertrack credit data analysts compared Super Prime/Prime unique apps to Subprime, the result was an even split: 42 to 41 percent. Add to this increasing loan terms, flat down payment amounts, and steady trade-in equity, and you get is a generation of car buyers with considerable and growing buying power. Wait a minute. Make that the largest and most potent car buying demographic in America.

Building Wealth

Fact is, Gen Y is building wealth to go with lives that are quickly evolving. The old saw about how these young “renter” consumers don’t “need” their own vehicle, is, well – not so much. It has arguably turned out to be a natural part of their evolution into adulthood. Consider these recent 2016 – 2017 findings from Dealertrack credit data: Millennials continue to grow their share of the market, with unique applications at 36 percent in 2016. More telling is that the uptick is accompanied by declines in older demographics, such as Baby Boomers. But then, most dealers know this by simply looking out onto the showroom. Indeed, the practical generation that came of age with terrorism and the Great Recession have emerged into a market that some analysts say is plateauing, heavy with incentives, and has a healthy amount of used vehicle inventory.

In other words: Buckle up.

Millennials probably aren’t going to share rides so much, after all. And maybe they really do need transportation to get to those newly minted and shiny jobs. One thing is sure: they’re leaving their parents' basements with a budding credit profile and a stronger position as buyers. In that way, Millennials are fundamentally changing the way cars are marketed, sold and financed. Yes, they want cars. But they want to buy those cars on their terms, and they now have the buying power to do exactly that. Are you ready?

*Dealertrack Credit Data, January 2017

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