PRINCETON, N.J.-Young adults look at cars today the same way they view their smartphones-quickly evolving technology used for a short period and tossed away for a newer model.
Kevin Tynan, senior automotive analyst for Bloomberg Industries, feels that is the primary reason leasing is taking off among young adults and said lenders need to pay attention to the trend.
Citing figures from Edmunds.com, Tynan said that in September lease penetration among compact and entry-level cars was 26.9% (of new car sales), a year prior the number was 20.9% and 16.7% in 2011.
Compact and entry-level is the car segment that 19- to 26-year-olds typically dominate, said Tynan. "They make up a large part of this car-buying segment."
Besides the technology in cars changing so quickly that young adults feel little attachment to their car, looking to upgrade at each significant advancement, the mindset of the younger buyer today is different, insisted Tynan.
"They are not interested in car ownership. Millennials don't want to be burdened with things like repairs and routine maintenance. A lot of the leasing programs now include routine maintenance. Leasing just makes life easier."
During the past year leasing picked up across many car segments, several reports have indicated. Melinda Zabritski, senior director of automotive credit for Experian, Costa Mesa, Calif., in a previous report (Credit Union Journal, Sept. 2) said leasing now represents 27% of all new car sales, up from historical averages of 23% to 24%.
Tynan said winds are favorable for leasing to continue to increase, addressing economic reasons, as well. "That big, expensive depreciating asset is not as attractive as it used to be. Leasing could well become the future of car ownership. For many consumers, cars are no longer the expression of freedom and individuality they used to be. They are devices, like your refrigerator-you just want to open the door, the light to come on and the beer to be cold."
