Lenders will not need to change their lending model as more millennial buyers take interest in powersports financing, but financial providers “will have to change the way they go about reviewing and understanding the consumer,” according to Michael Speetzen, Polaris Industries’ Chief Financial Officer.
Fico scores in general have been improving for the past several years, Speetzen told Powersports Finance, but there has been a demographic switch and with that “brings more challenges.”
There are challenges to attracting the millennial audience to the industry, but then the question is whether they will have the same credit quality as the older consumers, Speetzen said. Many millennials have a much lower Fico score because “they don’t have as much credit history, or the same types of things that the older demographic has, like a mortgage,” he added.
There’s a change in how the younger generation lives, “and that creates complexities around credit,” he said. Polaris’ retail financing partners provide the “right level of customer service” when reviewing consumer loan applicants, Speetzen added. “If there is a problem, it gets reviewed. If there needs to be an exception or the file needs a second look, this occurs and we support this approach with our lending partners. Flexibility is important.”
Polaris’ consumer credit quality structure provides “good positioning” for the manufacturer, and “for the most part, we are not taking on risk,” he added. Polaris maintains “high standards” when it comes to its consumer credit quality, Speetzen previously said during an earnings call. “We work through several of our retail financing partners that are very strong, and we are not looking to expand the credit profile down into areas that are going to put us in a position for increased loss reserves.”
Polaris currently has installment retail credit arrangements with FreedomRoad Financial, Sheffield Financial, and Synchrony Financial. The manufacturer also had a revolving retail credit arrangement with Capital One Financial Corp., which expired after the lender announced its exit from the powersports industry.