In the long list of articles blaming millennials for various ruined industries, you’ll probably find a few that cite the automobile industry. As the “subscription economy” continues to make its indelible impact on consumer habits, people – not just millennials – are rethinking the way they drive.
The past decade saw the advent of car subscriptions, essentially a service that allows you to access different cars, month-to-month for a flat monthly fee. But arguably the more impactful trend has been the uptick in car leasing as a means of financing, as opposed to purchasing.
In this article, let’s take a closer look at the luxury leasing trend, and try to uncover the reasons for it.
If the “sharing economy” has taught us anything, it’s that people are becoming increasingly averse to long-term commitment. Rather than purchase a library or movies, they’d rather join a flexible streaming service, like Netflix or Spotify.
Leasing affords this kind of non-committal flexibility. Rather than lock oneself in a roughly ten-year relationship with a vehicle, one that requires purchasing, upkeep and, eventually, selling, consumers are turning to leasing for ease.
When you lease a car, you sign on to a lease lasting (generally) between two and four years, at which time you simply turn the car over and move on to another lease. There’s no hassle, no stress and no having to put up with the problems of an aging car.
There’s a prevailing myth about the upcoming generation of consumers, that they don’t care all that much about cost. It’s simply not true. As with any other period, people still care deeply about money. Looked at through this lens, leasing, a more cost-conscious way of driving, makes more sense.
With traditional purchase financing, you need a hefty down payment, and you need to follow it up with sizeable monthly payments. With leasing, since you’re only paying for the depreciation of the vehicle, rather than the whole thing, the monthly payments are lower. It’s true that, at the end of it, you don’t have a purchased possession to show for it still makes more sense from a cash flow perspective.
Especially with luxury vehicles, which, if purchased, can be quite pricey, luxury vehicle leasing makes entry more accessible.
More Cars, More Often
Finally, if you want to understand the popularity of leasing, you have to understand the way people think about cars. With the auto industry constantly tweaking and improving their vehicles, a few years can make quite a difference in quality and functionality.
Leasers understand this, which is why they opt to exchange their vehicles every couple of years, as opposed to every decade. It’s also more fun this way. If you love luxury cars, you want to drive as many of them as possible in a lifetime, and leasing affords you that chance.
Given that leasing offers consumers better flexibility, lower monthly payments and more chance to drive new vehicles, it’s pretty easy to understand the leasing trend.