Beyond the metrics about originations, collections and other figures associated with vehicle financing, the 2014 member survey orchestrated by the National Automotive Finance Association highlighted just how important Millennials are to the present and future of the industry.

During his presentation at the 18th annual Non-Prime Auto Financing Conference, George Halloran discussed at length this new crop of consumers, individuals who are comfortable handling just about any part of their financial lives through the Internet at just about any time of the day. Halloran is the auto finance program director at Benchmark Consulting International, which assembled the survey for the NAF Association again this year.

“I think it’s very much on the minds of all finance sources because what we see is the younger generation, if they’re not shopping, they show up with mom or dad or grandma and grandpa,” Halloran said. “The dealerships are becoming much more connected to this kind of shopping. And the finance source similarly is becoming much more connected because these people want to shop when they want to shop. They want products and services available on their schedule with complete information and transparency.

“It’s kind of like if they wake up at 2 in the morning, eat a Snickers, drink a Red Bull and decide they want to buy a car, they want to do it right then,” he continued. “They want to find their financing then so you have to be online with your offers and processes so they can go to them and almost get to the point of pre-approval.

“In the non-prime market, it’s a little tougher, but that’s what they’re looking for. And the younger shoppers are shopping sometimes not for themselves,” Halloran went on to say.

The dialogue about Millennials that started again at the conference and now continues isn’t something new per se, according to Halloran. During other presentations at NAF Association events, he said the topic of Millennials came up, but now it’s even more pressing since this demographic appears to represent a much larger piece of the potential buying pool.

“I don’t think it’s too much of a culture shock, but it has been something they’ve been monitoring for years,” Halloran said. “It’s an evolution. Right now finance companies are serving two types of marketplaces. Those who are not Millennials, and those who are.

“They might not be actual customers yet, but they have a huge impact on the actual customer in terms of how they operate and the tools they use and information channels they use,” he continued.

Halloran made two other points about how finance companies must approach Millennials.

“These people are very social in the way they define social, which means they want what they want when they want it, and it has to be available in a fully transparent way,” he said.

“They’re not particularly price sensitive. They’re not necessarily shopping for the best price,” Halloran continued. “Their shopping revolves around more of what they want and what they can afford. If they think they can afford something, they’re not just going to look for the lowest price around. If they find something that’s acceptable — that’s what it means to be social to them — that’s the implication in terms of pricing and availability.”

Revamped Study Produces Enhanced Results

The NAF Association included metrics from the past two years in its latest study because officials took a one-year hiatus to revamp the survey process with their partner, BenchMark Consulting International. The association meshed together some of its long-standing analysis with new material provided by Experian Automotive and FactorTrust.

The new product resulted in the NAF Association and its members being able to identify nearly a half dozen challenges that are either new or have been presented but intensified in the past couple of years.

To reinforce the validity of its process, orchestrators pointed out that 77 percent of companies that participated are repeat contributors. The total accounts for the 22 finance companies that completed the survey surpassed 1.2 million, up 5 percent from two years ago when the last survey was compiled. The outstanding balances within the portfolios of the participants exceeded $10 billion, up 10 percent from the previous installment.

The 22 finance companies that participated included:

— AFS Acceptance
— Anderson Brothers Bank
— Automobile Acceptance Corp.
— Chase Auto Finance
— Crescent Bank & Trust
— FIFSG/First Investors Financial Services
— Foursight
— Gateway Financial Solutions
— MarkOne Holdings
— MPH2 Funding
— Nationwide Acceptance Corp.
— PFS Corp.
— Prestige Financial Services
— Regional Acceptance Corp.
— Security National Automotive Acceptance
— Southern Auto Finance
— Summit Financial Corp.
— Tidewater Finance Co.
— Top Finance Co.
— Turner Acceptance
— United Finance
— Westlake Financial Services

“A year and half ago, we decided that the survey questions that were being asked and the report we produced, the information was available from other sources,” NAF Association executive director Jack Tracey said. “We made a conscientious effort to try to find out what the marketplace wanted to know. We then built the survey form we’re using today to gather information so we could produce more relevant information that would be useful and not necessarily available anywhere else.

On top of that we brought in Experian and FactorTrust with their information stratified into just the non-prime markets. We feel now that we’re getting a broader overview of the industry, and the details we are providing hopefully will be some metrics to help manage their organizations,” he continued.

Highlights of Conference

One of the largest crowds ever attended this year’s NAF Association Non-Prime Auto Financing Conference, pushed in part by the presence of the Consumer  Financial Protection Bureau.

“I think it went very well. The feedback has been almost universally favorable,” Tracey said. “People think we really raised the bar this year on what we provided to the people in attendance.

“It was just a good event. It challenges me to keep the conference as interesting as we need it to be,” he continued. “With the CFPB out there doing things, it’s not hard to come up with items that people are concerned about.”

The event started with a Q-and-A session only for NAF Association members with Jeffrey Langer and Eric Reusch, who both are in the Office of Installment and Liquidity Credit Markets with the CFPB. Later a select group had the opportunity to have a lunchtime discussion with both of the CFPB officials who shared their perspective on the regulatory requirements the bureau is asking of finance companies.

“The CPFB people were very pleased with the opportunity to answer the questions the NAF members asked,” Tracey said. “Our people were extremely pleased with the exchange of information, getting a real appreciation for what the CFPB is trying to do.”

The conference included presentations from Sandy Schwartz and Tom Webb from Manheim, Amy Martin from Standard & Poor’s and Steve Chaouki from TransUnion.

Tracey shared one other element he noticed that made this year’s conference unique.

“We had a lot more funders than we’ve had in the past, which is an indication that the market is hot. There’s a lot of money out there,” Tracey said. “You could conclude that there is a lot of money in the marketplace chasing deals so there is a lot of pressure on the finance companies to lower rates or take riskier transactions in order to get the money on the street.

“Generally, those dynamics when there is a lot of money flowing into the market and the competition increases and there is a need for volume, we’ve reached the peak of the cycle and some of the negatives in the marketplace — delinquencies, losses, repos — those trends start to take over,” he continued. “Then, the market slows down a bit because people become spooked.

“The funders are there, and that’s good. But it also creates an environment that people need to be cautious of,” Tracey added.