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Lending Expert Says Leasing Increasingly Popular with Millennials
Tuesday, April 7, 2015 6:40 AM

One automotive lending expert sees leasing as a good way for CUs to beef up their loan portfolio as well as the percentage of Millennials within the membership. In a CU Today article, David Jacobson, president of GrooveCar, said that Millennials, in quickly growing numbers, are turning to leasing as an affordable way to buy a new car that has the latest technology and gadgets.

Millennials are all about technology, said Jacobson. “It is a major part of their lives. They want Bluetooth in their cars, all of the newest features like backup cameras, satellite radio, and to be able to get the Internet through their dashboard. They want the newest of everything, just like their phones. This is forcing them to buy new cars, which are more expensive.”

Millennials often don’t have a lot of cash to put down to buy a new car, and the lower lease payment of around $250-$350 fits many of their budgets. “Millennials are not looking for luxury in their cars,” said Jacobson. “They don’t care about performance and horsepower. They want transportation.”

That, as well as price, is steering them to entry-level compacts and sub-compacts, and occasionally mid-sized cars, said Jacobson.

With leasing, auto upkeep isn’t complicated, said Jacobson. “Millennials like to keep things simple. They don’t want to worry about fixing their car when it breaks down. And, it’s $100 an hour to repair a car today. The lease warranty covers a three-year term. Anymore, cars to Millennials are like appliances. When you buy an appliance you want the cheapest way to own for the shortest period of time so you can upgrade quickly.”

“Ninety percent of our leases are to new members,” Jacobson pointed out. “Which presents credit unions with a big opportunity to add new, young members. But credit unions need to be at the point where Millennials are doing their business. They have to have indirect leasing programs.”

CUs have to advertise to the membership and the community that they offer indirect leasing and tell people to ask for the credit union’s financing when they visit local dealerships, Jacobson advised.

CUs in recent years have hesitated to get heavily involved in leasing. But Jacobson said that is changing as credit unions realize leasing is important to the lending business model.