When it comes to buying a new car, baby boomers may have an edgeover the potential buying power of the much sought-after GenerationY.

Consumers in the 55- to 64-year-old age range are most likely tobuy a new car simply because this group has the second largestnumber of licensed drivers, according to a new study, MarketingImplications of the Changing Age Composition of Vehicle Buyers inthe U.S., from the University of Michigan's TransportationResearch Institute. Coming in first was the 45- to 54-year old agebracket that also includes boomers, the data showed.

Bottom line? “Baby boomers are your best customers,” MichaelSivak, author of the study, told Credit Union Times.

The research tracked data in 2007 and 2011 and examined thedifferences in the probability of licensed drivers purchasing a newlight-duty vehicle, including cars, pickup trucks, SUVs andminivans, as a function of their age.

While the peak probability of buying a new vehicle per driveroccurred among those between 35 and 44 years of age in 2007, ashift occurred in 2011, when those between 55 and 64 years of agemoved to the top of the ranking, according to the study.

“The present findings suggest that marketing efforts that focuson drivers 55 to 64 years old should have the highest probabilityof success per driver,” Sivak said.

For some credit unions, it may take some convincing to shifttheir marketing efforts towards boomers and away from Gen Y. The industry is in the midst of a movement to wooyounger members. According to CUNA, the average age of a creditunion member was 47 years old in 2012 and has been steadily movingup since 1989 when that figure was 42.8. Advocates say youngermembers between the ages of 25 and 44 are in their peak borrowingyears and they can potentially provide the foundation formembership growth in the future.

While the $7.3 billion, San Antonio-based Security Service Federal Credit Union's auto lending programdoesn't specifically target boomers, the cooperative's success inthis area has likely touched this demographic, said JohnWorthington, executive vice president and chief communicationsofficer.

“As we have a dominant market share in auto lending in all ofour markets, we know that we will be getting a significantpercentage of boomers among those loans and do not specificallymarket to them,” Worthington said.

Indeed, Security Service is on a roll with its vehiclefinancing. New and used car loans have surpassed the $548 millionmark, according to the credit union. In August, the financialinstitution was ranked fifth among prime retail credit lenders inthe country by the J.D. Power 2013 U.S. Dealer FinancingSatisfaction Study, among nearly 4,000 retail credit lenders in thecountry.

Worthington said he's not astonished at some of the findingsfrom Sivak's study.

“As the boomers have aged and generally acquired more wealth, itis not surprising that they are a dominant demographic in the carbuying market, especially as the economy is showing some signs ofrecovery,” Worthington explained.

Sivak said besides boomers having the most driver's licenses,another trend that highlights their auto lending influence can befound in the recent recession. After peaking at 17.8 million unitsin 2000, the sales of light-duty vehicles plummeted to 10.6 millionunits in 2009 before rebounding to 14.8 million in 2012.

In 2011, for those between the ages of 55 and 64, one vehiclewas purchased for every 14.6 drivers. Looking at even older cardrivers, for those 75 years of age and older, one vehicle waspurchased for every 26.6 drivers. By comparison, in the 18- to24-year-old category, one vehicle was purchased for every 221.8drivers.

Next Page; Cash Customers

Because baby boomers tend to have higher thanaverage income, they are also more likely to pay cash to buy theirnew vehicle than a typical consumer, said Blair Korschun, presidentof CU Direct Connect, a Centennial, Colo.-based vehicle lendingCUSO that serves 34 credit unions. They are also likely to put moremoney down, which lowers the loan to value and therefore, lowersthe risk of a loan, he noted.

“(We) can see where baby boomers would be among the largestbuyers of new cars for several reasons,” Korschun said. “Babyboomers are generally still in their peak earning years and theirnet worth is typically higher than a younger person's. Also, newcars cost much more on average than used cars. Boomers arelikely to have better than average credit scores because of theirhigher than average income levels.”

Many boomers are past the large expenses of college tuition andwedding costs and tend to have more discretionary income for largerpurchases such as a new car, Korschun added.

CU Direct Connect does not target older members because aperson's age cannot be used for loan pricing or for credit approvaldecisions and the CUSO is very concerned about maintaining propercompliance including avoiding any risks related to possiblediscrimination, Korschun said. However, boomers are still goodmarketing targets for credit unions as they have larger thanaverage deposits, he said.

“So as our participating credit unions grow their baby boomersegment, our CUSO in turn has more baby boomer credit union membersapproaching dealers for loans,” Korschun said.

CU Direct Connect has funded more than $8 billion in auto loansin Colorado since 2004 with approximately 25% being new car loansand 75% comprising used car financing, according to Korschun.Because there is a great deal of competition for low risk and highcredit score paper, the resulting profit margins on boomer loanswill likely be lower than on consumers with lower credit scores orwho put less money down, he pointed out.

“Maintaining a mix of consumer types, including boomers, isimportant to achieving blended risk and profitability targets for acredit union's portfolio,” Korschun said.

Rather than create an environment of “us versus them,” when itcomes to younger and older members, there may be room to bring thetwo together to boost the bottom line. Even though the boomers arethe ones signing the dotted line for new car loans, research fromDeloitte and CU Direct Corp. both indicated that 61% of Gen Y hasdirectly influenced their parents' automotive purchasing decisions,said Bob Child, chief of staff at CU Direct Corp., a national lending service provider inOntario, Calif.

“While loan volumes have increased, lenders remain risk adverse,Child offered. “Low FICO approval rates remain extremely lowcompared to 2008 and earlier, making it harder for Gen Y and X toobtain new car loans.”

Across the CUDL credit union auto lending platform, boomerscomprise 36% of all loan applications and nearly 43% of new carapplications, Child said. With a total of $6.5 billion of loanapplication volume through July, CU Direct credit unionscollectively have experienced 17% auto loan growth in 2013, headded.

There are several factors driving the CUSO's growth, Childsuggested. The average age of the used car on the road today isover 10 years old, putting more boomers in the market for new cars.This year also represents one of the highest years of new carintroductions by auto manufactures in years.

Sivak said he expects the trend of boomers buying more cars tocontinue for quite some time.

“The emphasis on this relatively older age group is furthersupported by the expected continuation of the graying of thegeneral population and the consequent continuation of the increasein the number of older licensed drivers,” Sivak said.