Millennials are often unfairly blamed for ruining everything – they ruined landlines, Blockbuster Video Stores, hotel chains, to name just a few of the complaints they’ve received. But one area in which millennials are creating growth is in vehicle leases. 41.7% of new vehicles are leased, and 28.9% of those leases were signed by millennials.
What advantages do millennials see in leasing rather than buying? To find out, this article will run through a few reasons that millennials prefer to lease rather than buy their automobiles.
Saving on Maintenance
Some auto-builders throw free maintenance into a lease, and, what’s more, these leases cover everything that lies between the headlights and taillights. Based on an average of driving 15,000 miles a year, times a $.05 maintenance cost per mile, the lessee saves approximately $700 yearly.
The average lease is three to four years. At a minimum, a leased vehicle is covered under the manufacturer’s warranty, which is usually 12 months/36,000 miles. For the first year, minus oil changes, maintenance will be free.
For the first 25,000 miles, it costs $1,400 a year to maintain a car or truck, and the next 25,000 miles costs an extra $800 a year. Assuming the odometer records 15,000 miles a year with a four-year lease you will be out from under the vehicle just as up-keep costs start to increase.
Getting More for Less
Millennials have figured out that depending on their income they can lease a luxury car they can’t otherwise afford to buy, since, on average, lease payments are 23% lower than finance payments.
Using a payment calculator offered by one car company, the cost of buying and leasing their top-of-the-line-model were compared. Selecting the mid-range trim package and assuming a 20% down payment with no trade-in estimated monthly payments would be $705 per month to buy versus $337 per month to lease.
Out-of-pocket costs can be saved with a zero-percent down lease. Manufacturers whose vehicles retain their value are more inclined to offer a good lease deal on high-end models.
Whether you buy or lease a car or truck, you bear the cost of depreciation. The loss of value on a vehicle is factored into the lease payment. This is where being able to afford a more expensive vehicle through leasing is beneficial: the higher the vehicle’s resale value the lower the monthly depreciation charge.
Younger millennials appreciate that, as their lives change, the type of vehicle they need and can afford will change. Experian reports that the average term of a car loan is 67 months, which isn’t all that long, and when you lease a luxury car in your city you might find the lease terms to be quite smaller. Leasing affords the flexibility of upgrading or getting the exact transportation you need without having to wait almost six years.
Leasing saves money on maintenance and up-front expenses, and lower monthly payments make it possible to lease a luxury car you otherwise wouldn’t be able to drive. Leasing an upscale vehicle also reduces the cost of depreciation, and having a shorter time frame of commitment gives lessees greater flexibility to change vehicles. In short: it’s inexpensive and flexible, perfect for millennials!