Why do millennials lease at a higher rate than other customer segments?
When it comes to car purchases, millennials c
hoose not to commit. For an increasing number of 18- to 34-year-olds, leasing is the preferred option for car ownership, experts say. In fact, millennials lease at a higher-than-average rate. Recent data from car shopping and industry analysis website Edmunds.com (edmunds.com) shows leasing accounted for 28.9% of all new-car purchases by millennials in 2015, higher than the industry’s overall lease penetration of 26.7%. The millennial lease penetration rate for new-car purchases increased 46% in the past five years. In the same period, lease penetration increased 41.7% for the whole industry. Why do millennials lease at a higher rate than other customer segments?
The short answer from analysts: millennials are a generation of digitally savvy property renters, who want to drive a car they can’t afford to buy, in a not-fully-recovered labor market.
Auto Finance News (AFN) asked experts to break this down. “When you look at millennials, some of them have not yet left their nest,” said Rick Finch, senior vice president at LendingTree (lendingtree.com) Autos. “You still get a good percentage of the population that isn’t buying, so the increase in the percentage could be kids getting out of college or millennials aging up a little bit and starting to need transportation,” he said. LendingTree’s definition of millennials is individuals born from 1983 to 2001. There is a desire among millennials to be economical and thoughtful about bills, because they are “recession babies,” Finch told AFN.
At the same time, their automotive tastes skew toward higher-end vehicles, analysts said. Edmunds ranked 10 vehicle brands according to the biggest difference between millennial lease penetration and lease penetration for the rest of the industry. Four were luxury brands, including Jaguar at 70.5% lease penetration among millennials versus an industry average of 57.8% for the brand.
“Most millennials understand and accept that they’re on a tight budget and that they need to stick to it,” said Edmunds Director of Industry Analysis Jessica Caldwell in a written statement last month. “But it doesn’t mean that their financial constraints limit them only to the most basic vehicles to get from Point A to Point B. In most cases, leasing opens the door to the bells and whistles that they couldn’t otherwise afford,” she said.
