Millennials are opening auto loans at a 21 percent higher rate than Gen X consumers did at the same age. But millennials are finding alternatives to other types of finance products, such as credit cards, according to a study by credit bureau TransUnion.
The auto loan and lease origination rate for Gen Xers when they were 21 to 34 years old was 12.09 percent, compared with 14.58 percent for millennials. That puts millennials ahead by 21 percent, TransUnion said. Millennials' personal loan originations are 98 percent higher than Gen Xers' at the same age, while their credit card and mortgage originations are lower -- by 22 percent and 47 percent.
The study compared millennial consumers, born from 1980 to 1994, and Gen X consumers, born 1965 to 1979, because they represent more than half of the overall buying power in the U.S., TransUnion said in a statement. "Younger borrowers offer lenders more growth opportunities in the future, as the largest volume of loan originations occur the decade after consumers turn 40 years of age -- a time when many consumers are near their peak earnings," said Ezra Becker, head of TransUnion's global research and consulting group.
For both generations, the study examined origination trends during a year when they were between 21 and 34 years old. For millennials the chosen year was 2015 and for Gen Xers it was 2001.
"Our study clearly shows that Millennials exhibit different preferences for credit products than Gen X'ers did at the same age," Nidhi Verma, co-author of the study and vice president in TransUnion's innovative solutions group, said in the statement. "While credit cards are not as popular with Millennials as they were with previous generations, purchasing or leasing an auto is clearly important to them. Digitalization allows consumers of all ages to more easily 'shop around' for vehicles, making the process less onerous. This is the market Millennials have grown up in, and the one in which they most naturally operate. In particular, the influx of [financial technology companies] into the personal loan space appears to have resonated as an attractive lending channel for Millennials growing up in the digital age."