SANTA MONICA, Calif. — Millennial car buyers are opting to lease vehicles at a higher rate than the overall car-buying population, according to Edmunds.com.
The vehicle information site looked at car registration data from Polk and found that leasing accounted for 28.9% of all new-car purchases by buyers in the 18-34 age range in 2015. This was higher than the average lease penetration of all buyers at 26.7%
The finding reflects a growing trend among millennials, with leasing for this demographic increasing 46% over the past five years. By comparison, the share of leasing among all car shoppers has increased by 41.7% in the same period.
Part of the reason millennials are choosing to lease is it allows them to get into a nicer vehicle while staying within budget.
“Most Millennials understand and accept that they’re on a tight budget and that they need to stick to it,” said Jessica Caldwell, director of industry analysis for Edmunds. “But it doesn’t mean that their financial constraints limit them only to the most basic vehicles to get from point A to point B.”
According to a recent survey, the majority of millennials were willing to put no more than $2,999 down on a new-car purchase and were not willing to pay more than $299 per month. Using Edmunds own tool, the “How Much Car Can I Afford?” Calculator, under those terms, shoppers who finance their purchase would be limited to a vehicle priced under $20,000. However, when those numbers are applied to a lease, shoppers could afford vehicles priced as high as $35,000.
“If they see a chance to get into a nicer car while staying within their budget, they’re likely to explore that opportunity,” said Caldwell. “In most cases, leasing opens the door to the bells and whistles that they couldn’t otherwise afford.”
In its analysis, Edmunds also discovered other trends related to leasing behaviors. It found that leasing was most popular among millennials living in Midwest cities. For instance, shoppers in Grand Rapids, Mich., were 33% more likely to lease than the city’s general population. Other Midwest cities in the Top 10 leasing markets were Minneapolis-St. Paul and Milwaukee.
Millennials also differ significantly from the rest of car shoppers in choosing which brands to lease. Millennials buying a ram truck are 30% more likely to lease than the general population. Other top brands that millennials are more likely to lease include GMC and Lexus.
The only market that millennial leasing rates are under the general population is in the compact car segment. While millennials leased new compact cars at a rate of 25.5%, the general population was more inclined to lease at 26.2%.