Automotive News Canada - April 2018 - v2 - 20

20

* APRIL 2018

AUTOMOTIVE NEWS CANADA

APRIL
F&I
FEATURE

I L L U S T R AT I O N S F R O M
AUTOMOTIVE NEWS CANADA
AND ISTOCK.COM PHOTOS

MILLENNIAL

MYTH
Young buyers are piling
on auto-loan debt, defying
perceptions that they would
prefer to use Uber and Lyft,
or that they just don't care
about owning vehicles

By JOHN IRWIN
TORONTO BUREAU

CANADIAN AUTO DEBT CONTINUES
to rise, but what's most surprising is that
young buyers - a group thought to have
little interest in vehicle ownership - are
shouldering much of the credit.
Credit-reporting agency TransUnion
came to the conclusion when it analyzed
consumer debt in 2017 for its quarterly
Canada Industry Insights Report.
According to the report, the average
Canadian consumer's auto balance stood
at $20,160 in the fourth quarter of 2017, a
year-over-year gain of a 1.47 per cent, with
Generation-X, millennial and Generation-Z
buyers increasing their non-mortgage debt
by as much as 23 per cent year over year.
Baby boomers, by contrast increased debt
by just less than one per cent (see chart).
The report supports a warning by credit-rating company Moody's that longer-term
car loans and auto debt are putting a strain
on Canadian banks' credit quality.
The numbers also contradict the
assumption that younger consumers are
instead keen on Uber and Lyft ride-hailing
services as well as hourly rentals. Indeed,
people living in major urban centres will
gravitate to such modes of transportation, but many still find themselves
desiring ownership, despite costs associated with parking, insurance and
general maintenance.
For automakers, dealers and
lenders, that would appear to
be welcome news. Millennials
account for more of the auto market than ever before, and Matt
Fabian, director of research and
analysis at TransUnion Canada,
anticipates that Gen Z-ers will
eventually make up about 30 per
cent of the population.

BIGGER BALANCES
Average non-mortgage debt balance by
age group (with year-over-year gain)

* All consumers $29,312 (+4.6%)
* Baby boomers $36,042 (+0.9%)
* Generation X

$41,042 (+7.3%)

* Millennials

$21,252 (+13%)

* Generation Z

$6,871

(+23%)

Note: TransUnion considers
Baby boomers to be those individuals
born between 1946 and 1964,
Generation X between 1965 and 1979,
millennials between 1980 and 1994,
and Generation Z to be from 1995
to present.
Source: TransUnion

Given younger buyers' inclination to
complete as much of the shopping process online as possible, Fabian said it
will be crucial for dealers and lenders to
adjust their business models to accommodate that.
"We're starting to see, when we talk
to our clients in the automotive space,
they're starting to think more about the
digital space and how you rebuild your
businesses for that."

HEADWINDS APPROACHING
Fabian said the continued growth
of the auto market in Canada - which
hit record sales of two million units in
2017 - puts it in a different light than
the market in the United States, which
is experiencing retreating sales. He said
it was unusual that Canada has experi-
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