Research from independent car buying site, carwow, reveals that nine in ten Millennials are renting or leasing modern day essentials such as cars, homes and mobile phones because it’s the only way to afford to them. Due to soaring living costs, a poll of 2,000 car owners by carwow shows that one in two millennials are not in a position to save any money at all, with 85 per cent saying the situation is exacerbated because they are saddled with a ‘huge’ student loan.
As a result nine in ten pay for modern day essentials – cars, mobile phones, accommodation, washing machines, TV and music subscription services – on a monthly basis, compared to just one in three of their parent’s generation.
The economic realities of being a Millennial – where the average house exceeds £215,000 and where the average student loan debt amounts to more than £32,000 means that they are becoming unfamiliar with the concept of owning, with ‘pay as you go’ evolving beyond phone and gym memberships to big ticket items. In fact, when it comes to cars, half of Millennial drivers have some sort of lease or monthly payment plan, versus just 11 per cent of over 55s.
Furthermore, one in six Millennials bought their first car via a finance deal, compared with a quarter of over 45s, whose first car was bought either via a bank loan (10 per cent) or by saving up to buy outright (60 per cent). Finance agreements – while becoming an economic necessity for the under 30s – also appeal from an aspirational point of view.
A quarter of Millennials (28 per cent) expect to own a brand new, never–driven-before, car by the age of 18, whilst the majority of those over 35 had to wait until their 30th birthday to get behind the wheel of a brand new vehicle.
90 per cent of Millennials who currently finance a car admit that the main appeal was simply that ‘they wanted to drive a brand new car, not a second hand model’ compared to just 30 per cent of over 55s.
In a similar vein 70 per cent highlight the appeal of having the newest, latest models as the main reason they opt for finance agreements, which allow drivers the opportunity to swap their car for a new model at regular intervals.
Data from carwow shows that Personal Contract Plans (PCP) have emerged as the main form of car financing amongst its customers. In the past 12 months, PCP deals accounted for over 60 per cent of the site’s sales, with just 30 per cent of cars bought outright.
Despite admitting that big ticket items are now simply out of reach for the pockets of Millennials, seven in ten say that it is still important to them to own their own cars at some point in their lives, compared to six in 10 of those over 45.
72 per cent also admit that owning their own home is still a major milestone they’re aiming for long term, aligning them most closely with over 55s (81 percent).
David Edmundson-Bird, retail expert and principal lecturer at Manchester Metropolitan University, said “We’re living in a period where paying for things outright and in one fell swoop is rapidly disappearing – this is the advent of the subscription economy. People have fewer cash reserves or large sums of disposable income, and practically every item from services such as car insurance to the ownership of a mobile phone is based around monthly payments.
“Even software companies like Microsoft have moved to a model where you can pay a monthly subscription to use office software that updates regularly rather than hundreds of pounds for a version that goes out of date. People are able to plan for predictable monthly payments such as Sky TV or Netflix and we’re even able to pay their vehicle tax on a monthly basis without resorting to traditional forms of credit such as cards, overdrafts and loans.”
Rob Abrahams, head of market development at carwow, says: “Financing of cars has transformed the approach of car ownership amongst today’s young drivers. Saving is much less feasible than in the past, so accessing the latest model on a monthly payment plan is hugely appealing. PCP in particular has made new cars accessible to more people. The momentum behind PCP has also acted as an effective ‘education’ on the concept of short term ownership and regular change cycles, paving the way for leasing or Personal Contract Hire – a true long term rental which is appealing to more and more people, especially younger people.
“With a PCP deal you don’t own the car at the end of the contract unless you opt to and what we are seeing is that actually, very few people pay the ‘balloon’ payment at the end of the agreement – with many opting to start a new agreement on a new car For a generation used to paying monthly rather than outright ownership, PCP and PCH will increasingly be seen as ‘the norm’ for those who can afford the monthly payments.”