As millennials age, the vehicles they choose to buy may change, but the way they look at affordability will likely remain consistent.
Millennials are the fastest growing segment of car buyers and will represent 40 percent of the new-vehicle market by 2020, Automotive News reported this week.
Unlike baby boomers, millennials calculate affordability by monthly payment rather than total purchase price, said Jeff Schuster, senior vice president of forecasting with LMC Automotive.
According to Moody’s Analytics, young consumers, those 34 and under, had the largest share of auto loan originations in the third quarter: 26 percent.
Many millennials purchase compact cars over more expensive vehicles, but as their lifestyles change, many may switch to SUVs or crossovers to accommodate a growing family. The impact of the monthly payment, however, will likely last.
Young consumers are accustomed to a payment, subscription-based culture. It fits in with the rest of their purchasing habits.
AutoGravity, a financial technology company whose leasing and financing mobile app and web platform enables consumers to arrange their transaction with a dealership and lender, is working on a solution that would enable customers to search by monthly payment and vehicle type. Customers could search for an SUV at a maximum payment of $300 per month, for example.
Millennials aim for convenience. And for frugality, which in their minds means a good deal. The sooner they know the monthly payment, the more satisfying the car-buying experience is likely to be for them.
