Millennials Like Cars (Full Stop) and Are Warming up to Leasing
It’s long past time to put the bike (myth) away.
Outside of certain urban centers, Millennials are cuckoo for cars. Jobs and families and lifestyles, you see. As more members of the youngest car buying cohort show up at dealers looking to sign on the dotted line, their method of payment is evolving, too.
According to Dealertrack figures published by Automotive News, one of the main reasons for the dramatic upswing in Millennial car buying — besides aging — is long financing terms and low, low monthly payments.
Dealertrack data shows that in 2015, buyers aged 18-34 made up 35 percent of new auto loans. As of July 31 of this year, the average loan term was 70.5 months, up from 68.9 months in 2012.
While automakers fling youth-oriented vehicles at Millennials, sometimes via embarrassing and tone-deaf advertising campaigns, the car-buying demographic is increasingly taking the short-term approach to ownership. Adjustable-term loans are still king, but leasing is on the rise.
Loans outnumber leases among Millennial car buyers by a ratio of 19:1, but that’s less of a difference than in past years. From summer 2013 to summer 2015, the ratio was 24:1. In July, 27 percent of lease credit applications were from Millennials buyers, up from 20 percent in 2012.
The increase in young people turning to leasing can be blamed on a number of factors. They include Millennials being turned off by the thought of a long-term financial commitment, and the fact that many in the age group have extra cash on hand from living with their parents.
A high approval rate among Millennial lease credit applications shows that only those who feel they can really afford it bother to opt for leasing.
Naturally, more young people are turning to subprime credit to finance their first car. That’s to be expected as young people with little or no credit go after new wheels. According to Dealertrack, 43 percent of this year’s subprime credit applications originated from Millennials, up 15 percent from the first seven months of 2011.
[Image: American Honda]
More by Steph Willems
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As a borderline baby-boomer/Gen-Xer, I've always preferred daily-driving beaters, tho I've also had a "good" car (or two) on standby. This last go-round, I leased a '13 Ford Edge Limited. I leased for several reasons: I don't drive a lot of miles (
We've been through the buy versus lease song and dance so many times. So I will provide 2 examples from my vehicle shopping just this week. Looking to buy another vehicle and trade either a 2011 Hyundai or a 2005 Buick. Both bought new. I will not countenance trying to sell privately, have neither the time nor the patience. The Hyundai was bought 66 months ago. Total cost with tax and destination rounded to 24,750. Offered a trade in value of just under $5k. Cost of ownership $300.75 per month. Plus $125 annual rustproofing, winter rims. new set of tires, coolant change, brakes front and back. Let's say $330 per month. I could have leased the same or a similar car for 48 months, returned it and leased a new one for another 28 months for a monthly cost of about $12 more. 2005 Buick that cost $28,500 new, including tax and destination. Owned for exactly 10 years (120 months). Total cost of $237.50. Put in just over $3,500 in parts and service over the past 24 months. Offered less than $1k as a trade. Making a total ownership cost of $258 per month. In return had the wife stranded on the side of a highway, many trips to and from the garage, etc. For about $20 more could have leased a new 'commuter' sized car that would have had more safety features and that I would not have to worry about the kids driving. So how much per month is peace of mind worth?