SANTA MONICA, Calif.—Millennial car buyers opt to lease their vehicles at a higher rate than the overall car buying population, according to a new analysis.
The finding from Edmunds.com suggests that Millennials are more willing than older adults to sacrifice the long-term financial benefits of car ownership to get into bigger or more luxurious vehicles that are typically more affordable through leasing, the car-buying platform stated.
According to an Edmunds.com analysis of car registration data provided by Polk, leasing has accounted for 28.9% of all new car purchases by Millennials in 2015. The percentage exceeds the industry-wide lease penetration rate of 26.7%, and reflects a 46% increase in leasing by Millennials over the last five years. By comparison, the share of leasing among all car shoppers has increased 41.7% during that period.
“Most Millennials understand and accept that they’re on a tight budget and that they need to stick to it,” said Edmunds.com Director of Industry Analysis Jessica Caldwell. “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. In most cases, leasing opens the door to the bells and whistles that they couldn’t otherwise afford.”
There is a dramatic difference between what Millennial shoppers can afford when they choose to lease compared to when they choose to buy. According to a survey of Millennials conducted in June by Edmunds.com and Morpace Inc., a majority of respondents (57%) said that they are willing to put no more than $2,999 down on a new car purchase, and a similar majority (54.9%) said that they are willing to pay no more than $299 per month.
Shoppers who choose to finance their purchase on those budgets are generally limited to vehicles priced at under $20,000, said Edmunds.com. “On the other hand, shoppers who are willing to lease can apply the same upfront and monthly budget toward a vehicle priced as high as $35,000.”
Edmunds.com also found that leasing is especially popular among Millennials living in some Midwest cities. In the most dramatic example, the company found that Millennials in the Grand Rapids, Mich., market are 33% more likely to lease their new car purchase than the city’s general car shopping population. Other top-50 markets where Millennials are more likely to lease are Minneapolis-St. Paul (30.5% more likely) and Milwaukee (26.4% more likely).