According to U.S. Census Bureau population projections, millennials are expected to overtake Baby Boomers in 2019 as the younger group’s population swells to 73 million and boomers decline to 72 million. The opportunity for auto loans for millennials is substantial. Wharton’s The U.S. Auto Industry in 2019: Twists, Turns and Bumps Ahead confirms this. In the article, Paul Eisenstein of TheDetroitBureau.com credits millennials for a boost in demand in 2018 after two consecutive years of decline. “Every analyst I’ve talked to said that it was largely an increase in millennial sales that surprised them. We are likely to continue to see that as they get older, they get wealthier and they can start buying new vehicles.”
Auto lenders should be optimistic about millennials. To make the most of the opportunity, lenders need to understand millennial attitudes, engage them in their preferred channels, and use fintech to support quick and confident lending decisions.
Auto Loans for Millennials: Quick and Convenient
Millennials are well-connected—online, and mobile. Prior to purchasing they spend hours researching the market, reading reviews (of vehicle and dealers), comparing pricing, insurance, and financing alternatives. When they make a decision, they are well informed. While not all of the research is done via mobile devices, the convenience of mobile to obtain information virtually anywhere and anytime is indisputable.
As a result of the convenience and breadth of services provided by mobile devices, millennials have come to expect a similar level of convenience in all commerce transactions. Book a flight, hotel, or AirBnB in seconds. Hail a ride. Choose from products sourced worldwide and have them arrive at your front door in 48 hours. If your service isn’t quick and convenient, you’re at a disadvantage.
How To Capture the Opportunity
Look for these three capabilities available in modern, cloud-based loan origination solutions:
- Online and mobile auto loan applications that are entirely digital (no paper);
- Quick decisioning for the quick, convenient transactions that millennials demand; and
- Use of alternative credit data to verify financial strength of younger millennials just starting out who haven’t established stellar credit scores, but are nonetheless good credit risks.
Digital Auto Loan Applications
Lenders need an online presence and mobile capabilities that make loan applications easy and speedy. Intuitive navigation, autofill, conditional fields based on previously entered information, and data validation help ensure the correct information is entered accurately. Capture and digitization of driver’s license, pay stubs, or documents tied to stipulations via smartphone eliminate delays associated with paper. The best loan origination solutions let lenders develop online and mobile user experiences (UX) using WYSIWYG methods (no coding) and preview the UX on simulated desktop and smartphone environments to ensure ease of use.
Automation and decision rules eliminate needless delays caused by the manual review of applications. When the LOS receives the digital loan application, lending decisions can be made in seconds, which millennials expect. The power of automation and decision rules that translate credit policies into predictable, repeatable processes helps you:
- Automatically qualify applicants with exceptional credit scores and offer the best terms;
- Auto-decline applicants whose attributes indicate high risk or who do not match your credit policies;
- Auto-structure to systematically and iteratively apply decision rules. Auto-structuring modifies loan terms and develops one or more acceptable deals whenever applicants initially fail your credit policies; and
- Issue a conditional approval with stipulations, such as verify last three years employment or require additional $1,000 down payment.
Automation and decision rules let lenders respond to loan applications in seconds. That’s what it takes to meet millennial expectations of quick and convenient transactions. Lenders also benefit by improving their probability of capturing loans.
Use Alternative Credit Data So You Don’t Miss an Opportunity
Millennials at the tail-end of their generational demographic (b. 1990-1996) may not have established credit records. Lending decisions based solely on credit scores may result in overlooking creditworthy millennials. Alternative credit data uses a wide range of consumer data to replace or complement traditional credit scores. The larger data pool helps assess borrower risk more effectively.
A consistent record of rental, utility, and/or mobile phone payments can boost an applicant’s chances for obtaining a loan or obtaining better terms. Frequent address changes and gaps in employment history are also often risks to be avoided. Lenders who want to tap the opportunity presented by millennials should view alternative credit data as vital for making well-informed lending decisions.
Auto Loans for Millennials: Maximize the Opportunity
Lenders should be optimistic about the opportunities for growth and profit provided by millennials. However, landing your share of these potential borrowers requires more than just credit bureau subscriptions. You need to understand millennial attitudes and expectations, and to satisfy them with the latest fintech.
defi SOLUTIONS can help you maximize a generational lending opportunity. Mobile, automation, and alternative data are essential. Make sure your organization keeps pace by contacting our team today or registering for a demo of defi LOS.
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