Car payments have morphed from a temporary nuisance into a permanent part of many people’s budgets. Whether that’s a bad thing depends on what you do with the rest of your money.
One-third of millennial car buyers chose a lease last year, which helped push auto lease volume to a record of 4.3 million and 31 percent of all new auto purchases, according to market research by Edmunds.com.
“There is a greater percentage of people who view car ownership as a monthly payment like their cell phone or cable or Wi-Fi,” says Jessica Caldwell, executive director of strategic analytics at Edmunds.com. “It’s just the way we live our lives.”
Lease payments are typically lower than monthly loan payments for the same car, and leasing is less expensive than buying new cars every two or three years. But leasing is far from frugal, especially compared with paying off a car within five years and owning it for a few more. People who lease don’t get a break from payments or build equity toward the next purchase.
But younger buyers in particular are more likely to view cars as technology that needs to be continually upgraded, Caldwell says.
“It used to be cars didn’t change that much in five years. Now they do,” she says.
(Even Consumer Reports, which typically recommends buying over leasing, suggests leasing electric cars because the technology is changing so fast.)
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