Economic Hurdles
Depending on the vehicle, millennials can even end up with lower monthly lease payments than a “basic” car would cost, if it were purchased with a loan. “With them [millennials] wanting to be economical, they are still able to drive a nicer car for [a monthly payment of] about 20% less by leasing than if they had to buy,” Finch said. “Whether or not it’s a wise decision, it depends on the lease.” The monthly average payment for an auto loan is about $480, compared with $400 average monthly lease payments, Finch said.
And that works well for millennials.
Many millennials are already snowed under by student loans. The fraction of consumers in their 20s with student debt has jumped to 52% in 2014 from 32% in 2005, according to recent TransUnion (transunion.com) data.
Millennials often have a hard time finding a job that corresponds to their degrees or qualifications. “So instead of starting as a ‘rookie’ at 20, they [millennials] end up as ‘rookies’ later on,” said Dennis Carlson, deputy chief economist at Equifax (equifax.com). “They don’t necessarily have a lot of disposable income yet.” But when they do get the extra income, they won’t necessarily be spending it on purchasing a car, Carlson told AFN.
“Millennials are sort of considered the Renter Generation. Why own a car, if you can rent a car?” he said. “It’s both a financial decision, coupled with the attitude of, ‘I like the latest tech and I don’t want to commit to a car.’ ” Millennials are very tech-focused, Carlson said. With rapidly developing technology within the vehicles — which becomes obsolete quickly — younger consumers may choose to not commit for longer periods of time, he said. “If we look at cars from three years ago versus today, the level of standard technology is tremendously different,” he said. “I suspect we are going to continue to see that level of innovation.”
