Millennials are taking out more auto loans than the generation before them did.
Auto loans made up 14 percent of all newly opened accounts for millennials in the last half of 2014, compared with 1 percent of newly opened accounts for members of Generation X in the last half of 1998, when they were at a comparable age.
But Gen Xers had more of other types of debt, including bank card and mortgage debt, Experian said last month.
Back in 1998, “we weren’t just out of a recession,” Melinda Zabritski, senior director for Experian Automotive, told Automotive News. Millennials don’t have the “appetite to have that same type of debt that Gen X did over a decade ago.”
Experian noted that while millennials are buying and financing vehicles, their lease penetration is lower than that of other age groups.
That’s because leasing is typically used to acquire a new vehicle, Zabritski said. A millennial’s first car is typically a used vehicle, she said.
Millennials took out 13.4 auto loans per one lease, four more loans per lease than Generation Xers, which had a ratio of 9.3 to 1, and five more than baby boomers and the Greatest Generation combined, which had a ratio of 8.3 to 1
“Lessors typically look for someone with strong credit and more credit history around vehicles,” Zabritski said.
Millennials, which Experian defines as those ages 19-34, had the lowest average credit score at 625 as of December 2014. Gen Xers, ages 35-49, had a 650 credit score, and baby boomers and the Greatest Generation combined, ages 50-87, had an average credit score of 709. The national average is 667.
“It’s important to keep in mind that credit scores are built on credit experiences,” said Michele Raneri, Experian’s vice president of analytics and business development, in a statement. “While this generation has been slower to use credit, they have plenty of opportunities to build a positive credit history.”
Older millennials who have already purchased a used vehicle and have established credit are more likely to have an auto lease than younger millennials, Zabritski said.
Millennials now number 83.1 million, the U.S. Census Bureau said in June. The generation, which the bureau defines as those born between 1982 and 2000, makes up more than a quarter of the nation’s population. Their size exceeds baby boomers, which today number 75.4 million.