Are Gen Y and Gen Z the Leasing Generation?
Millennials and Gen Z are driving significant disruptions today. From moving beyond the 9-5 work culture to wanting to drive change and sustainability to seeking more options when it comes to transportation. So, what makes this demographic different? Is it the fact that they are digital-first natives and expect flexibility and mobility across all their transactions or more than that?
Let us first answer, who are millennials & the Generation Z? While there may be some debate between the actual birth years, anyone who is born between 1981 and 1997 can be tagged as a millennial. Many also refer to millennials as the ‘Gen Y’ generation or ‘digital’ natives. On the other hand, ‘Gen Z’ refers to anyone born between 1997 and 2015. The reason is primarily due to the year of birth or coming of age at the dawn of the 21st century. These ‘plugged in’ generations were the first people to be born in a digital world where technology is a part of everyday life. According to popular statistics, a typical millennial checks their smartphone at least 150 times a day; the oldest millennial had access to the internet since high school.
Interestingly, there has been a dramatic shift in culture and value for Gen Y and Gen Z generations. They have completely redefined relationships. The difference between the baby boomers and the Gen X generation is quite stark. Whether it is hanging out with friends online, getting married and having children by a certain age, planning retirement, or even buying a house or a vehicle, the traditional yardsticks simply do not apply to this group. Instead of concentrating on the ownership of assets, millennials today are more focused on achieving professional success and giving themselves the time to attain financial freedom.
The power of ownership is wavering on these digital natives. Home ownership among millennials in the United States fell to 34% in 2016, a record low in five decades. In 2020, the figure went up to 47.9%, which was still low. And young consumers, according to the U.S. auto industry is predisposed to leasing vehicles as opposed to owning them.
The scenario is not very different in India. Indian millennials and Gen Z are shying away from long term financial obligations that come with owning high value assets like a home or a vehicle. While convenience and connectivity are definite considerations, the need of the hour is flexibility. And owning assets such as homes and vehicles certainly do not contribute to reaching that objective.
The primary belief among these two generations is in the contemporary pattern of ‘pay as you go’. And leasing falls completely in line with that. At the end of the day, it simply comes down to a shorter commitment.
The 3 major trends that are influencing Gen Y and Gen Z towards leasing and subscription models today are gratification, commitment, and affordability.
A Stanford University study touted that delayed gratification is a significant precursor to success. In today’s on-demand world, the term ‘delayed’ is subjective. Millennials and Gen Z, on the other hand, are people who seek instant gratification that can be easily attained through leasing and subscription models and with much less financial planning.
Gen Y and Gen Z today are more interested in spending their hard-earned money on experiences rather than investing in ownership of assets. Only about 30% of millennials live with a spouse and child are married compared to 46% of baby boomers when they were of the age that millennials are now. This simply goes on to show that this generation is not big on commitment at all – something that is closely associated with asset ownership.
A key consideration among millennials when it comes to ownership of assets is affordability. Moreover, many such purchases require financial down payments that a lot of the Gen Y and Z generation people have not had time to create. In such situations, renting or leasing seems like a more attractive option.
All these trends drive in the same direction to make it clear how leasing fits in perfectly with the millennial lifestyle. Depreciating assets like vehicles are not something that millennials and Gen Z want to invest in at all. In fact, they look for freedom of choice combined with minimizing any long-term financial obligations. This frees up capital that they can use elsewhere – an idea that fits in with the Gen Y and Z lifestyle completely.
According a study, 51% of Indian millennials are reevaluating their need to own a vehicle. On the other hand, leasing makes it possible for the Gen Y and Z generations to access the convenience of a private vehicle along with tax benefits minus the responsibilities of regular maintenance, insurance, etc. Moreover, if one is a vehicle buff, changing over to the latest models as they arrive in the market is a real possibility that cannot happen frequently if one owns the vehicle.
For the auto sector, the idea of leasing is a gamechanger. Many in the automobile sector even believe that lease penetration is correlated to long term customer loyalty. From a consumer perspective, it shows the inclination towards the concept of shared mobility powered by digital solutions ensuring a safe commute for those availing of the service.
The feeling is not just limited to leasing vehicles. Given that demand is increasing, the concept is slowly spreading across multiple product categories and is predicted to explode in the next few years. So long as the model caters to the fuss-free lifestyle of these two generations, leasing is here to stay.
Views expressed above are the author’s own.
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