Auto loan marketers should focus on their customers, not on their loan companies, according to a research report released by the Australian Auto Loan Industry Association (ALIA).
The study was conducted by the research group, which is part of the Australian Automotive Industry Association.
It found that young people were less likely to pay off a car loan than their older peers, who have a greater degree of credit history and more credit risk.
“It’s important to remember that younger people will not have access to all the features and benefits of an auto loan and may be more reliant on other sources of income such as rent or credit card payments,” the ALIA report said.
“However, we know that there are many young people who may not be able to get access to the most expensive cars and services, and it’s important for auto loan marketers to work with young people on how they can better manage their finances.”
Auto loans have become a key part of young Australians’ financial lives, as well as their social lives, says the research.
But the industry is struggling to keep up with the growing demand.
The number of auto loan applicants has jumped to more than 30 million last year, up from just 6,000 in 2015.
This rise has resulted in a boom in the number of young people taking out auto loans, which now account for about 40 per cent of all loans, according the report.
“Young people are more likely to be more likely than their parents to borrow from a family member, and more likely, when borrowing from their parents, to take out a car as a means of increasing their personal finances,” the report said, noting that this could result in higher debt and a lower level of savings.
“The car loan boom also has the potential to affect young people’s financial futures, with the likelihood that they may not find a suitable mortgage to finance a new vehicle,” it said.
The report also found that the number, age and gender of the respondents who borrowed from their families increased from 6 per cent to 13 per cent, and the number lending to other people dropped from 15 per cent in 2015 to 7 per cent last year.
The research found that a greater proportion of young adults were able to secure loans, with more than 80 per cent having a credit history of six months or less.
“There’s a lot of pent-up demand for auto loans in Australia, particularly for younger people, who are less likely than older people to have the disposable income needed to repay their loans,” the study said.
Topics:consumer-finance,consumer-protection,loan,financial-marketing,business-economics-and-franchises,credit-default-fiat,loans,business,housing-industry,consumer,education,economy,annual-seasonal,finance-and/or-fraud,australiaFirst posted February 02, 2019 06:57:51Contact Ben MoultonMore stories from Victoria