On 24th August a usually sunny-minded friend of mine Max gave me a call, the envy in his voice almost acidic, blasting his lack-lustre car.
Let me put you in his shoes. As a petrolhead, imagine the frustration when you see people your own age, who you work just as hard as, driving around in, as he said, “shiny new Beemers or Mercs”. He’d got himself into a boiling stew. Then he called me for advice on how to replace his four-year-old motor, asking: how come others can afford better?
Thankfully, I didn’t need to give him career advice. The answer to his problem was much simpler than that.
Millennials are leasing rather than owning
To understand what’s happening, look at the broader picture. We live in an extremely exciting age, one which is aspirational and fast-moving. As consumers we spoil ourselves for choice, with new computers, exclusive mobiles, and ever more interesting digital gadgets on the market — we want the best and latest.
And how do we satisfy that craving? There’s a new mentality around monthly payments. When you pay for a gadget monthly its cost is lower, its usage package is better and its eventual replacement is easier — we’re used to casual relationships with the things we use.
Take a second to look at your phone. Now imagine a new model has been released today – it’s faster, it looks nicer, it weighs less, its battery lasts longer, and it’s the first of its kind on the market. You get the call for a free upgrade. Do you take it?
Of course you do!
And that’s the new mentality. Nowadays it not only applies to technology, but also to housing, leisure and yes you guessed it, premium cars.
A few years back, buying a house, computer or car was seen as a major investment. Now, in this new age, millennials like Max are more concerned with keeping up to date. They’re treating a Mitsubishi like a Motorola, an Infiniti like an iPhone, a Subaru like a Samsung — and they’re doing it by leasing.
The benefits: why millennials are so hot on leasing
This certainly isn’t a passing fad. The benefits are spreading by word of mouth, and leasing is rapidly becoming the de facto way to finance a new car. With a healthy growth rate of 15% to 20% year-on-year, the UK leasing market is booming. And it’s no surprise.
For one, leasing is simpler: as a customer, you have no long-term contracts, you save money, and you have a new vehicle every two or three years — so you can drive the latest cars and impress your closest friends.
For another, leasing is faster: most prospective lessors research the car they want on the internet. They know their budget and just want someone to supply their chosen vehicle quickly — setting up the lease is a cinch.
What does this mean for dealerships?
Leasing is creating growth in the automotive industry. Which is an extremely good thing — the new car markets have never been as buoyant.
Consequently, more and more dealerships are embracing leasing. And given the current trend for aspirational motoring, successful dealerships will likely continue to lease for many years to come. At least, if they want millennial customers like Max. After being flustered about his banger he spent half-an-hour with me. I talked to him about leasing. He could hardly believe it. He was much calmer. And within moments he was sold — saying goodbye to his days of ownership, and hello to four-wheel drives he used to only ever dream of driving.
Craig Moran has over 25 years of experience in the automotive industry, and is currently Contract Hire Manager for Autohorn Fleet Services.
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