MADISON, Wis.—As auto sales and loans climb back toward pre-recession levels, credit unions should pay attention to an important attitudinal shift among Millennials.
Ride-sharing services, such as Uber and Lyft, have some analysts predicting new car sales could eventually be negatively impacted by 10%, explained Steve Hoke, director of loan growth products at CUNA Mutual Group, during the company’s 2014 Discovery Conference earlier today.
“And more Millennials, data show, are delaying getting a driver’s license,” said Hoke. “An attitudinal shift is taking place—having a car is not as great a need with younger Americans as it used to be.”
Hoke said CUs should pay attention to this trend as they make their lending projections in the coming years. Hoke also proposed that sharply rising student loan debt, as well, could delay new car purchases among Millennials.
U.S. Sales To Reach 16.2 Million Units
Overall, U.S. new cars sales are expected to reach 16.2 million units this year and 16.75% in 2015. Credit union auto loan growth is up 12.1% in 2014, and CUs hold a 15.74% share of the overall auto lending market.
The growing car sales and loans, and the smartphone boom, place greater demand on CUs to offer auto lending websites optimized for mobile devices, insisted Hoke.
As analysts have shared during the last year, consumers are relying a great deal on their smartphones before and during the car-shopping process, and also in the F&I office.
Hoke said data from CUNA Mutual Group’s loanliner.com loan application tool shows 25% of loan applications are done through a mobile device, and industry data shows 63% of consumers shop with a smartphone while on the dealer lot.
“This increase in mobile use means consumers are able to be well informed throughout the process of purchasing a car,” said Hoke.
As attention should be paid to optimizing the mobile channel to assist members in the car-buying process, the CU should not make the mistake of sacrificing other channels members use to interact with the CU for car loans.
“It is very important to be available to members through mobile means and to make sure all of your channels, including face-to-face interactions, complement one another,” Hoke said.
Terms Extending
Hoke also addressed how terms are extending—a trend cited in a CUToday.info report. Hoke pointed out 33.1% of car loans extend 72 months or longer, cautioning that a lending bubble could be building, especially with 27% of new car buyers upside down on their trades.
During the Q&A session, Hoke shared an insight into how lending habits can vary by mobile device. He cited that smartphone users average about $8,200 per loan, while tablet users borrow about 55% more. Hoke surmised that tablets are more discretionary mobile devices than smartphones, and therefore owned by people with more discretionary income.