By: Jessica Schirripa
Generation Xers, as well as the baby boomers, have been known to invest long-term when it comes to their vehicle purchases while it seems millennial drivers are leasing as their chosen approach. Leasing has accounted for nearly 29% of all new car sales penetrating the marketplace by the millennial public in 2015. An inflation of 46% over the course of the last 5 years has been on a continual incline based on a recent automotive study conducted by Edmunds. The study discovered an overwhelming distinction between what millennial shoppers can afford compared to what they choose to buy vs. lease.
What is the driving factor that makes leasing such an attractive option?
First and foremost, millennials favor leasing because they are able to select a more luxury-style car at a lower rate upfront without being able to afford the opportunity to buy it outright. This is extremely appealing to the visually influenced and status stimulated millennial culture. This allows 20 somethings to be sporting around and seemingly appearing a bit more successful than they actually are. Fake it til’ you make it right?
Based on the volume over the first six months of 2015, market research has highlighted Lexus, Mercedes, Infiniti, and BMW to be among the top automotive leases for that target demographic.
Although this lifestyle seems to be a wise decision, or at the very least popular for image, leasing may not be the best thing for your bank account in the long run.
Here are the questions a millennial should be asking themselves to avoid financial disaster:
How much can you afford?
Is your monthly payment 20% or less than your net pay? (Experts advise it should be…)
A lease is an agreement, a written contract that is taken very seriously- and no one likes broken promises. Hence, breaking the words behind your signature on the dotted line often results in an expensive cost. Accuracy in your estimate of budget will be key in keeping costs low while offering wiggle room to satisfy the full term of the lease. There are many apps available that use auto lease calculators to help determine how much your monthly payments configure to figuring in additional costs and customized details (insurance costs, drive-off fees, mileage, etc.)
*Remember by going above the mileage limit within the designated time frame of your lease will have dramatic negative effects on your wallet as well as potential future terms of agreement. You are better off buying more miles up front if you believe you may go over the cap.
Research quality automobiles and prices. Call multiple dealerships, private or publicly owned and acquire several quotes. Keep in mind, you are in charge here. Your money is your money until it is theirs. Each dealer is ultimately bidding for your business.
Negotiation. Who has the better deal? The more bang for your buck? Once all of your options are presented, it is time to haggle a little. Retail manufacturer prices plus whatever bogus add-ons come with the territory can be subject to change. Bottom line, profit does need to be made. This is America. But you do not have to become the millennial myth taken for a ride by his car bills!
Educate yourself. The auto industry will always be booming as people need to get around and meet their destination, but the more you know about leasing, the better chance you have at lowering your payments and making smarter investment choices for your future. After all, a car is a big purchase that typically only depreciates in value the moment your ink hits paper!