Perhaps, you’ve had a similar experience. You go to a car showroom and see a high-end vehicle that’s out of your price range. Maybe you have strong willpower and end up purchasing a car you can actually afford, or maybe you leave the dealership stuck daydreaming about how great the engine pickup was on that luxury car.
The latter seems to be occupying the minds of the millennials, those between the ages of 18-34, as more and more individuals decide to lease cars.
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According to a recent study, there has been a 46% increase in vehicle leasing by millennials within the past 5 years. For contrast, the leasing share for the entire population has only risen 41.7%. That’s a significant upturn for Generation Y, but what’s the source of it?
Call it instant gratification or a need to succeed (and show others that success), but more young drivers are taking advantage of the opportunity to get into a finer car. Typically, drivers can afford cars that have more bells and whistles when they lease instead of buy; sometimes leasing vehicles $15,000 more than they would be able to purchase under the same monthly budget.
The younger generation may have financial constraints, but they’ve recognized that they don’t necessarily have to limit themselves. Millennials have specifically gravitated towards Ram, GMC, Lexus, and Jaguar cars more than the general population and leasing seems to be most popular in many Midwest cities.
Should You Jump on the Bandwagon?
Well, now you’re likely wondering whether you should go sell your Civic and drive around a Jaguar. Before you decide to lease like a good percentage of millennials are, consider these points:
- You don’t own the car.
All right, we know you understand this already but it is an important factor to weigh. Yes, cars depreciate over time but an owned vehicle is still an investment that you can sell or use towards a new car purchase. Leasing a vehicle is not an investment, and your money paid each month won’t build up any equity.
- How far do you drive?
When you lease a car, you typically have a limit on how many miles you can drive during the term. Mileage can be a hard item to estimate and project three years out, so be sure you plan ahead so you don’t get hit with extra fees.
Before you sign a lease, check your car insurance rates. Sometimes, leasing companies require more coverage than you would normally need, and that can be more expensive. Also, a higher end vehicle may be more costly to insure. Research and get quotes so that you aren’t blindsided with a higher premium.
Leasing a car can be a great option, and it seems to be working for millennials. Without the need for a large down payment or loans, drivers can afford to operate the kind of vehicle they want to. Just be aware of other, hidden costs and consider which route is best for you.