Aug 27, 2018 Walt Wojciechowski
For people looking to buy a new car and wondering about whether to buy or lease, there's no right or wrong answer. It all depends on goals, needs and expectations. But based on data compiled by Edmunds, millennials' car ownership interests lean toward leasing.
In 2015, the most recent year for which data is available, nearly 30 percent of 18- to 35-year-olds opted to lease their new-car purchases rather than purchase, Edmunds reported from car registration data put together by Polk. That's up by approximately 46 percent tracing back to 2010, which over the same period saw a 41 percent increase in leasing among all car shoppers.
"Millennials represent the largest generation in the U.S."
Sometimes referred to as "Generation Y" and born between the early 1980s and the mid-to-late 1990s, millennials represent a substantial portion of the American populace, currently outnumbering the baby boomer generation. Indeed, according to Census Bureau data reviewed by the Pew Research Center, more than one-third of the labor force fall into the millennial category. That's the equivalent of 56 million individuals. In other words, the trends found among millennials help shape the economic marketplace in terms of what sells and resonates with the consumer public.
Midwest millennials leasing in droves
For millennials old and young, leasing is the way to go, finding it to be a more convenient option than buying an automobile outright or through financing. This is particularly true in the Midwest. For instance, Edmunds found that 50 percent of millennials in the first quarter of 2015 leased new car purchases compared to 37 percent of all buyers. The difference was slightly less dramatic in Minneapolis-St. Paul, but notable nevertheless, with 39 percent leasing versus 29 percent overall.
Jessica Caldwell, director of industry analysis at Edmunds, chalked up millennials' liking leasing to its affordability.
"Most millennials understand and accept that they're on a tight budget and that they need to stick to it," Caldwell explained. "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. If they see a chance to get into a nicer car while staying within their budget, they're likely to explore that opportunity."
She added that millennials appreciate fully equipped vehicles and leasing enables them to add some of the extras that they may not be able to pay for otherwise.
Millennials renting, delaying buying homes
For whatever reason, millennials by and large seem more averse to ownership than prior generations, seemingly adopting a "try it before you buy it" mentality. For example, with most millennials now at that age in which they're living on their own, 36 percent of the U.S. is renting out a house, condo or apartment, according to a recent report from Zillow. In 2006, the renter rate was 31 percent. Of the 50 most populated cities, 29 of them contain more renters than homeowners.
"The cost of buying a house has risen without fail for 77 months in a row."
These statistics are seemingly corroborated by research from the Urban Institute. The Washington, D.C.-based think tank found the homeownership rate among millennials stands at 32 percent, compared to 60 percent among Generation X and 75 percent of baby boomers. When they were twenty- and thirty-somethings, about 40 percent of Gen Xers and boomers owned.
Similar to the reasons why millennials prefer leasing to buying, finances seem to be a bit of a sticking point. According to the National Association of Realtors, the cost of buying a single-family house has risen for 77 months in a row. The current countrywide median is $269,600, a 4.5 percent increase compared to last July.
As the Urban Institute reported from its findings, millennials also frequently live in major metropolitan areas, where the cost of living tends to be higher than more rural or suburban locations. Inventory tends to be limited in the city as well, which further drives up costs as a result of demand.
With approximately 33 percent of the underbanked being millennials, the country's largest generation may seem elusive. Regardless of your industry, they represent a major opportunity for sales, which can be leveraged through alternative credit data. Get more intelligence on your customers with the powerful risk management solutions available through Microbilt.