Five expectations next-gen borrowers bring, and what digital collections changes

In short: Younger borrowers expect a car payment to work like every other app on their phone: split payments, flexible dates, and messages from a sender they can verify. Most auto lenders still send a fixed amount, a fixed due date, and a text from an unknown number. Digital collections closes that gap with one clear next step.

Last updated: November 3, 2026

Brian Terr is Founder and President of Auto Recast Services, which works on the debt finance side of the automotive industry. He previously founded Inventory Command Center, acquired by J.D. Power, and was VP of National Accounts and Business Development at Edmunds.com. He has spent 25 years in the automotive industry.

A borrower texts the servicer: Can I pay half now and half on the 28th?

At most lenders, that message lands in a queue and gets read the next business day. By then the money has gone to rent, and the account sits a week closer to auto loan delinquency.

The request was reasonable. It also describes how an entire generation already handles money everywhere else. These borrowers aren't careless with money. Last year, 47% of adults aged 18 to 29 received help from someone outside their household to pay an expense, and the share of under-30s saying they were doing okay financially fell meaningfully. They're managing tight cash flow with tools built for it, and the auto loan is the obligation that hasn't caught up. A car loan payment still arrives the way bills arrived in 1995, while every other payment in their life moved to digital payments years ago.

Here's what next-gen borrowers expect, and what most lenders actually send.

1. Splitting a payment is already how this generation often pays for things

About 22% of adults aged 18 to 29 used “buy now, pay later” (BNPL) in the past year. Dividing a purchase across dates is one default option on their checkout screens.

That changes what a split-payment request actually means:

• A borrower asking to pay half now is describing a schedule.
• The answer matters less than the latency, because a reply tomorrow arrives after the money is spent.
• Half a payment received on time beats a full payment that never comes.

That appetite for flexible payments is not a hardship signal. Read the next number carefully, though. 32% of young BNPL users paid late, against 26% of users overall. Appetite for flexible structures runs high, and so does the stumble rate. Flexibility only works with a reminder attached and a way to adjust before the miss.

2. A third of adults earn on a rhythm the due date ignores

Roughly 30% of adults had income that varied at least occasionally in 2025, rising to 34% among non-retirees. 11% said they struggled to pay bills specifically because of it. Gig work, shifts, commission, seasonal hours. A fixed due date assumes a fixed paycheck, and for a third of borrowers that assumption is wrong before the loan is a month old.

Timing outreach to when someone actually gets paid pulls payments forward 3 to 5 days across KredosAi deployments.

Payment reminders tied to a payday rather than a calendar date do most of that work. A due-date change does the same with no contract amendment at all, and most borrowers never learn it's available. Flexible payment options already exist inside most servicing platforms. They just never reach the borrower.

3. Branded messaging is what turns an auto loan payment reminder into a reply

Nearly all young adults carry a smartphone, about 97% of those aged 18 to 29, and 27% have no home broadband at all. For a quarter of young borrowers, the phone is the only communication option.

What arrives there now is an unbranded message from a number nobody recognizes, containing a link. Every security instinct a younger borrower has been taught says leave it alone. The lender records a non-response and reads it as avoidance.

Channel engagement from KredosAi's deployments shows the size of the gap:

• Branded RCS messaging draws 43% engagement.
• Plain SMS draws 25%.
• Email draws 15%.

The industry benchmark for plain SMS sits at 5 to 10%. The content is identical. What changes is whether the borrower can see who's asking. RCS business messaging carries the lender's name, logo, and a verified sender, which is the difference between a message a borrower opens and one they report as spam.

"It's the trustworthiness of the communication. That rich communication, a branded communication about 'hey, it's time to make your payment,' will be a big part of it." - Brian Terr

4. A menu of options produces the same result as no options

A borrower juggling rent, a card balance, and a car payment opens a portal and finds a payment plan calculator, a hardship form, a deferral request, and a contact page. The common outcome is closing the tab. Decision fatigue is well documented outside lending, and a past-due borrower is already running low on it.

One option, chosen for that borrower, gets a reply.

"This consumer is more predisposed to engage with a modification. This consumer is more predisposed to engage if you give them a different option to pay. Or this consumer is predisposed to just need a reminder." - Brian Terr

The borrower sees one path. This is what conversational payments look like in practice: the borrower texts a question, gets a compliant answer, and settles it in the same thread. The sorting happens on the lender's side, and it rests on having tested thousands of message, channel, and timing combinations. A multi-armed bandit does that continuously, shifting volume toward what works within hours instead of waiting months for a conventional test to reach statistical significance.

5. The loan structure itself lags the expectation

This is the problem no messaging fixes.

A traditional car loan is fully amortizing. It starts high and runs to zero on a fixed schedule. The people signing those loans grew up paying monthly for access to things and canceling when they wanted.

The industry's workaround has been stretching the term.

"Loans that have typically been 48 to 60 months. How they're 72 months, sometimes 84 or even 96." - Brian Terr

Something closer to a used-vehicle lease or a balloon structure would fit the expectation better, with a smaller payment over the term and a way out at the end.

"I think eventually subscriptions will come around. Maybe there's a different kind of used-vehicle lease. But they're not really here yet." - Brian Terr

Until they arrive more broadly, the available levers are the ordinary ones. A due date change. A split payment. Payment plans offered before an account rolls rather than after, which is how to prevent repossession long before a recovery vendor is involved.

Trust is what all five are asking for

Each expectation above is the same expectation in different clothing. Copying a payments app without earning the trust underneath gets a lender nothing. The ones who earn it find out that most borrowers who went quiet were never refusing to pay. They just never got a message they believed, at a moment they could act on.

Judge it on cure rates and completions rather than on messages sent. The same trap shows up in AI agent evaluation in collections, where testing for the wrong signal means optimizing for it. A collections strategy built for next-gen payers is measured the same way it's built: one borrower, one message, one next step.

FAQ

Does changing a due date hurt loan performance?

A due-date change alters no contract terms and costs the lender nothing structural. When the new date lines up with payday, it removes the calendar mismatch behind a large share of early-stage misses.

Is RCS worth it compared with SMS?

On the KredosAi platform, branded RCS achieves 43% engagement compared to 25% for plain SMS. The content is the same. The difference lies in whether the borrower can see who is sending the message.

What is text to pay?

Text to pay lets a borrower settle a bill directly from a text message, usually through a secure one-tap link, without a portal login or a phone call. In auto servicing, it removes the step where most past-due payments stall.

Can I text my auto lender to split a payment?

Increasingly, yes. Lenders running two-way texting can accept a split request, confirm it, and schedule both halves inside the same conversation. Where a servicer still routes texts to a queue, the same request can take a business day, which is often long enough for the money to go elsewhere.

How does decision fatigue affect loan repayment?

Every additional option costs the borrower effort, and a borrower already managing competing bills tends to resolve that by doing nothing. Presenting one workable option rather than a menu is why intelligent collections platforms sort on the lender's side before the borrower ever sees a choice.

How should a lender respond to a partial payment?

Treat it as a structure the borrower is proposing rather than a shortfall to flag. For someone already managing several installment schedules, half now and half later is how they budget. Responding with a split arrangement converts it into a completed payment, while treating it as a deficiency usually produces silence.