Generation Z consumers — those born in or after 1995 — have a healthy appetite for credit, despite growing up through the worst economic recession since the Great Depression, according to TransUnion data. In fact, 66% of the Gen Z population over the age of 18 are credit active. This was TransUnion’s first in-depth look at this generation, Matt Komos, vice president of U.S. research and consulting, told Powersports Finance. Credit-active Gen Z borrowers have a higher rate of prime credit scores, at 50%, than millennials did at the same age, at 39%.
While TranUnion doesn’t break down powersports loans in particular, Gen Z customers aged 18 to 24 have a more robust appetite for credit than millennials did at the same age, especially in auto, unsecured personal loans and credit cards.
Going into the study, TransUnion anticipated that the younger generation would be less interested in traditional credit products, such as auto loans and credit cards, than what was observed, Komos said.
“Our initial hypothesis was that [Gen Z consumers] wouldn’t be utilizing cards and taking out auto loans but, in fact, we found that with the strong economy, the low unemployment rate and rising wages, these young consumers are attracted to products that provide a good value proposition.”
In addition, Gen Z consumers, as the first digital native generation, are attracted to the evolving experience of taking out a loan, such as the ease of filling out an application and quick decisioning.
“These features are attractive to younger customers,” Komos said. “If you think about the evolution of the car buying experience, whether it’s how much you can research a car prior to buying it, there’s so much more information out there. You can shop for your loan options online, you can go you can get pre-approved through different lenders. I think all of this helps consumers be better armed for the purchasing experience,” he explained.
In addition, lender sophistication has evolved in terms of the ability to underwrite risk using machine learning and big data, Komos said; this, in turn, has helped extend credit to riskier populations of Gen Z borrowers.
“This generation is important for lenders,” Komos said. “Generation Z is actively seeking credit, so it’s important to understand these behaviors, and for lenders to know where their interests lie and their needs to best serve these consumers.”