Car leases are the new cell phone plans. That may sound a little crazy, but according to this Fortune article siting an Edmunds analysis, Millennials tend to see them as one in the same.
Every time a new a new iPhone or Android smart phone is released, there is a mass of shoppers spending their money faster than they can swipe their debit cards, all in order to have the next best thing. That seems to be the case when it comes to new cars as well, at least for shoppers between the age of 18 and 34. Some are even referring to new cars as “smartphones on wheels.” Yay, consumerism.
One of the top four most-popular brands that millennials are leasing from is GMC. According to the study, millennials are actually 26.1 percent more likely to lease one than a member from the general population.The trend seems to be bigger vehicles that are tech-centric and have a luxurious demeanor. The other 3 brands are Cadillac, Ram, and Lexus, with Buick also making the list of brands leased by millennials.
What are your thoughts? Is this generation silly for leasing over purchasing vehicles? Or is this what you also do? Let us know just below.
Comments
I’d buy that it’s more fun for millennials to swap out cars every few years — just like their phones. I mean, why not? Especially if maintenance and repairs are on the dealer. (Come to think of it, I’m kinda liking that idea.)
What I’m not buying is that “some are even referring to new cars as ‘smartphones on wheels.’” That kinda smells of marketing distortion.
A lease is a must for millennial folks like my son- he simply does not pay attention to basic maintenance. Yes, this drives me crazy and has been an occasional source of friction between us. Just seems willful to me. My hope is his car doesn’t kill us in an upcoming move and he then leases a new vehicle within the next month to two.
A lot can be tacked up to just the cars now. Cars aren’t much of a blank slate like they used to be. And commitment, pay out the ass for one or lease it and always have something new. Personally I prefer long term ownership, but I’m not the majority.
It often it the only way they can afford a new car today. Many are saddled with major collage debts and get to the job market that pays little as there are so few high paying jobs for collage grads of average grades and majors.
Lets face it many accounting grads are find they can get a job at a bank that pays little. Even my wife with an Education degree left to go elsewhere for more money than got her masters in that field.
I also buy the Apple cell phone purchasing theory. They like the latest and with the electronics in cars every changing it will play a larger roll as we go. Even Tesla is using this model.
“It often it the only way they can afford a new car today.”
Agreed. I did the math and forget to say something about it. I figured a kid would drive off with that Terrain for under $200 a month. Not bad.
For $200 you get a base model with few options. The base model is nice but many of these kids want to load up on options and that makes a lease even more attractive as they can load up more options.
What they are looking to buy or in this case lease too often is a SLT2 or Denali Terrain. They want all the electronic toys and better Entertainment systems. That can take the price from $24K to $42K if you opt for the AWD and V6 package. The price climbs fast.
The lease options gives them more leverage to get more vehicle but in the end they lose more equity. It is much like owning an older house or renting a newer Condo. In their case it is the difference from owning a used car to owning a new car.
If they are comfortable with this then it is good for them. Older people tend to keep things longer and want more or hold equity at the end. First time new car buyers generally have little equity to put in and that is a tough way to buy a new car.
There really is no right or wrong here it is what ever that generations is more comfortable with.
I work with a friend and he and his wife lease because they both can get a new car and truck every few years and they make the deal at the same time. He has been good with this for many years but of late e has started talking about buying as he is tired of not having anything to show at the end of the lease. He is making better money now and can better afford to buy and keep the truck more years.
He did say he likes it now as when the tires are brakes are just about due he gets a new lease. I kidded him that he changes cars not oil. LOL!
Budgets make a difference.
As prices keep getting higher and incomes remain flat I expect more may rely on this as their cars get older and are too expensive to repair and too expensive to buy new. I really expect that this option will only grow.
As of now We can afford to buy but I have looked at the lease just to consider the cost and value. I really do not want to do it but with the prices going up each year I keep it as an option.
+1 to you John.
You’re right. I was pricing at the Base Model, unaware that said picture was a Denali until I looked at it again.
That said: I don’t buy the premise that kids wants to get ‘the bestest’ if money is tight and they are leasing. What I do believe is that a lower level Terrain for a kid is mindblowingly awesome compared to some Sonic or whatever. That simply the size of a Terrain is status enough.
“He did say he likes it now as when the tires are brakes are just about due he gets a new lease. I kidded him that he changes cars not oil. LOL!”
That is funny.
You know — the more I think about it — leasing is kind of the car enthusiasts dream. You end up ‘owning’ way more cars that way. And can ‘enjoy’ a costly car without all the expense of actually having to own one. It’s sort of the ‘food court’ option of cars.
My neighbor drives a Camaro. A part of me is like, how cool, but then another part of me shakes my head and says, sheeeet… she throws money away on gas now don’t she? She gets… what… 16 going to and from the supermarket? And how often does she really get to fire up that engine? Sure, on the LA highways… which like all highways have speed limits and like some highways are hip deep in traffic. And so a part of me thinks, umm… you’re being silly driving that thing.
But I spoke to her about it and she told me she was merely leasing it for two years. She had a small car previously and would be leasing a “Mom” crossover afterwards. In this way she got to drive one ONCE, which is kinda cool. If you only own it for two years and you don’t drive all over creation — the gas wouldn’t be THAT bad.
Well the lease vs. buying is a deal that many argue about and there is no clear cut answer that fits all buyers.
There are advantages to both and it just depends on your situation.
The fact is with a Lease and if you do not have much money you can get more car. Also if you have a business you can get a tax break. You can also trade for a new car more often with a few other advantaged depending on your situation.
On the other hand you can not modify the car unless you can put it back. If you drive a lot going over 12K-15K a year can place a high penalty on you. You never own a bit of the car and when you are done you turn the car in and have no equity to show for all the money you paid.
If the car breaks you are still required to repair no warranty items. If you fail to make payments you can lose the car and still have to pay for it with no equity again.
On the other hand if you can buy a car you can keep the equity and use it for a new down payment. You can drive as many miles as you like. If you can buy it out right or keep a car at least 6 years you are better off buying as it is cheaper in the long run. You may have to buy a lesser model if you are buying at the limit of what you can afford.
There is even more here but as you can see this is something you really need to do your home work as there is good and bad to both but it just depends on your financial status and how long you keep a car or how far you drive it. If you want company cars a business is better leasing.
My friend leases as he get more car than he can afford to buy and he can not really come up with a large down payment though as he has leased so long he has no equity.
In my case I started off with used cars and was lucky to buy the right ones through the years as I was able to sell them for more than I paid. {I bought in the Muscle car era when they were cheap and sold them when they appreciated}.
I could roll that money over and bought my first three new vehicles for cash. This got me to the point where I keep them about 10 years and sell them at about 100K miles. I have been able to roll the money get back into a down payment. This cycle has been good for me but not many people can get that first leg up on being able to pay cash on the first one. I was lucky to be buying and selling the right cars at the right time. I was doubling my money back then. Today I could have sold several of the cars for 10-15 times what I paid. Hind sight is 20/20.
As for what people buy. Generally most people go for as much car as they can afford too often many buy more car than they can afford. This is where option packages bring appeal as you can increase options at a better price. The Terrain in the past that offered a technology and chrome package. It added all the SLT trim and 19″ wheels along with the top radio with GPS at a very good price. It really helped sell the vehicle.
When we got our they had a V6 package for $600 because there as a shortage of 4 cylinders due to storm damage to the Tonawanda plant in NY.
The real issue GM or at least Chevy has is they really have no lower priced car that is really exciting for people in the 30 years and younger group. The Sonic is ok but not terribly exciting. The Colorado 4×4 should help and the Turbo Camaro if insurance is not a killer should also help.
I would like to see the Sonic offered in 3 and 4 door RS package with a real performance engine in it. This does not have to be a giant killer as that gets too expensive like the new Ford RS that is going to be starting at $35K. 315 HP but not many younger people can afford that.
Odds are I will never be interested in a lease per how long I keep a car. It is like how I refused to rent a house vs. buying an older starter house and then working my way to a new house. I wanted something to show for the money I paid monthly and take it to apply to the next level. Just the way I am and what worked for me.
Like everything else these days cars are just another “disposable” item. Once a car hits a few years old it’s considered”old” and time for a new one even though 9 times out of 10 it’s perfectly fine. The majority of my generation have no clue on how to maintain a car…
Leasing and financing is another discussion both have pros and cons. I kind of like the idea of leasing ( but I’ve never done it ) but someone like my dad sees no point and thinks you are throwing your money away. He also keeps cars until the wheels fall off. Our oldest new car is a 09 Kia Borrego V8 and it’s not going anywhere anytime soon. We bought it new with 30 miles on it and it has 56k I believe.
You know, I kinda just realized this, but millennials are the “generation that throws everything away” but generations before us kept cars until about 60,000 miles and then traded them in because they were considered worn out. It’s just not true. So why are we told that we throw away cars because we tend to lease them, when previous generations crushed cars after they were barely broke in?
I agree on all points you brought up, but your comment just made me think about that.
To be fair many times many cars just cot more to repair than they are worth.
Get a Hyundai with a broken cam belt that ate the valves it can be very expensive. I have seen this happen more than once.
Used/older cars are cheaper, but the costs require budgeting. BUDGETING is a skill few millenials posses.
So they know “I make $1200 a month, I can afford a $300 a month lease”, but if they buy a car, what if it needs a $2500 repair?
My wife’s BMW cost $2500 for an electrical related CCC module. It also needed a new battery. 3 years ownership cost was $83/mo BUT that would have requried someone to put that money aside for the occaisonal significant expense.
Car repairs cost a lot more than they used to, so I know a number of people lease because they “know what its going to cost them”, but what they fail to account for is “if I put the same money in the bank and paid out when I had a problem, I’d end up after 3 years with $179/mo savings (which is $6444) I can put towards my next car. Instead they spend the lease amount ,end up with nothing but owning a nice car.
I think the talent of budgeting is a major impact. Most millenials don’t budget at all for variable expenses. They Rent, lease, and have monthly contracts for everything they use. Even things like software, you used to save up for it- now you pay monthly lease fees… It shouldn’t be a surprise that the same thing happens today with cars, but its not just “cell phone contracts”- its music- instead of buying CDs you subscribe to a music service. INstead of buying DVDs you subscribe to netflix. Instead of buying Adobe Photoshop you pay a monthly fee to access it. Instead of buying a house you rent (House ownership is at the lowest its been in almost 50 years),
So many carry so much credit card debt it is scary and they are not all millennials.
It makes sense for some people. If you have to take out a 6 or 7 year loan to afford a new car (and I think they have 8 year car loans now), just to turn around and trade it on something new and repeat process, why not lease? If you look at the payments as a constant like rent or a cell phone plan, why not get a new car out of it every three years instead of continuing to pay on something aging and out of warranty. You get the benefit of always driving something newish, and having a full warranty vs paying the same or more to have some continually diminishing equity in your vehicle. I’d probably consider leasing, but all of the leases now are those stupid “ultra low mileage” ones (usually around 10k per year). I drive 13,000+ miles per year (more if I take a long road trip), and the cost of buying extra miles + worry about overages diminishes any price advantage in having the lease. Plus, I personally hate making payments for things. I bought my cell phone upfront, and only pay $25/month for service. I paid cash upfront for all of my cars too, it’s what works for me.
Dead on, I’m 35 and I upgrade my car as often if not more often than my cell phone now thanks to leasing. With how fast tech is changing, my gen and especially the lower gens don’t want to be stuck with an outdated vehicle for 10 years. In the past 13 months I’ve leased the following
15 Escalade premium. 15i Escalade Platinum, 15 Range Rover SuperCharged, and just two days ago I ordered my 16 Range Rover Supercharged. in that same time I’ve only made 1 phone change.
Yes we don’t call them smartphone on wheels, but in many ways that is what they are becoming.