New car leases are becoming more and more popular with consumers, with the new car lease rate increasing 41.7 percent in the last five years, according to Edmunds.com. There’s a surprising group that’s helping to drive the trend: millennials.
There’s been a lot written about millennials – the generation born between 1981 and 1997. Millennials came of age during the Great Recession, and worry about carrying crippling college loan debt (the New America Foundation reports that the average amount of educational debt held by a person with a bachelor’s degree is $30,000). While The Atlantic writes that out of any generation, millennials worry the most about student loan debt, some millennials have found a way to work a new car into their budget by leasing.
An analysis of car registration data by Edmunds.com found that millennials lease their cars at a higher rate than the new car market as a whole. So far in 2015, 28.9 percent of all millennials who bought a new car financed the purchase by leasing, compared to an overall lease rate of 26.7 percent. In the last five years, Edmunds found, the number of millennials leasing new cars has increased 46 percent.
What’s driving the trend? In short, leasing is a more affordable way for millennials, and all new car shoppers, to get into a nicer new car than they otherwise could afford. When you buy a car, you have to finance the entire purchase price. When you lease a car, you only have to finance a portion of the car’s price because you’re not keeping it when the lease period is over. So rather than paying $30,000 for a new car and keeping it, for example, someone who leases would pay $15,000 over three years and turn the car in when their three years are up. There are some downsides to leasing, though. For more information, check out Buying vs. Leasing a New Car.
“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.”
If you’re looking to get into a new car, leasing may be one way to do it, even if you’re not a millennial. When you decide that leasing is for you, you’ll still want to shop around to get the best deal. Check out the Best Lease Deals to find the leasing discounts and incentives automakers are currently offering. You can also explore leasing and get guaranteed savings through our Best Price Program. Be sure to also follow us on Twitter and Facebook.