Despite the recent pump of the brakes for 2016 auto sales, one demographic remains a driving force in moving metal off dealership lots: Millennials.
According to Dealertrack, that generation is currently the fastest-growing auto retail segment, representing 35% of all loan originations in 2015 and shattering illusions that they were more likely to choose ride-sharing programs or flexibility for mobility than purchasing a car.
According to Dealertrack data, through July, there were 19 auto loan applications per one lease application transaction. This ratio was lower for Generation X and Baby Boomers. Both for 2013-14 and 2014-15, the generational pool ratio accounted for was approximately 24 auto loan applications per one lease application transaction.
There was 49% growth in Millennials' share for lease contracts found in the network from 2012 through June 2016, suggesting that Millennials want to get into a car faster with a lower entry point of a lease rather than a purchase. Millennials’ share of lease applications is up 7% year-over-year from July 2015 YTD, suggesting that the group has an increased appetite for vehicle ownership.
Jason Barrie, vice president of market performance and F&I solutions at Dealertrack, says the biggest differentiator is that Millennials are still looking to purchase and own a car, but at their own pace.
“We’re seeing an increase in lease applications, which indicates there’s a want for ownership at a faster rate, but at a lower price point in the marketplace,” Barrie tells Marketing Daily. “Particularly in the younger half of the generational pool, they are looking for more financial flexibility, with a rate that fits their budget.”
As the fastest-growing auto retail segment, Millennials are an important part of the success of dealers, he adds.
“Car buying is moving into a digital direction, as consumers are demanding a more transparent experience, Barrie says. “Using data to drive a larger conversation, dealerships are connecting their online storefront to the in-store sale for the ultimate customer experience, particularly with the Millennial car buyer.”
There are two key pieces marketers should take away from the data, says Andy MacLeay, director of digital marketing at Dealer.com.
“The first one is throwing out the notion that Millennials aren’t interested in buying cars,” MacLeay says. “We’re seeing the data both internally across Cox Automotive and externally that loan and lease applications are on the rise with this group, indicating there’s an appetite for vehicle ownership.”
The second is there needs to be trust built with Millennials throughout the buying process.
“Guiding them through the online to in-store car shopping experience and providing complete transparency—that “old-school trust”—will help build the connection between the group and dealerships,” MacLeay says.