South African Millennials, who have grand aspirations and the need to control their destiny, all agree that they are not willing to do without a vehicle, as for them mobility equals empowerment.
No wonder why one of their main interests is owning a car.
Having mobility enables them to go out, earn money and define their future. They can access reliable and, most importantly, affordable mobility by either buying or leasing a car.
South Africans, in general, tend to follow a more traditional financing model when it comes to buying cars.
They borrow money from a bank and then make the purchase. But the vehicle leasing concept came into being to provide an alternative to dealing with rising interest rates. And this seems to be appealing to the majority of those aged 23-37 who believe that choosing to lease a car over buying may suit their financial needs and pockets.
However, the price of the two options may not differ that much. If we compare car loans in SA, we’ll see that the annual interest rate of a R300 000 car loan payable in a 60-month period can be as low as 9,5 % with monthly repayments of R6 301. As regards the price of a car lease, the vehicle lease of 2016 cars can range in from R4 100 to R4 400 per month on average.
A vehicle lease lets Millennials pay for use of a vehicle in monthly instalments for a set period of time.
This way, they can drive a band new car every two to four years depending on the time of the lease agreement.
However, they are not the owners of the car and the agreement comes with limitations attached, particularly, on vehicle usage (there is a maximum amount of kilometres allowed and any amount over will incur penalties).
On the other hand, if they purchase a car, they own it once they have paid off the loan they took out to finance the purchase price of the vehicle. If they own the vehicle, of course, there are no limitations on how they can use it.
Yet a car loses about 19% of its value annually, which means that the car’s value decreases considerably during the time it takes to pay the loan in full.
When it comes to car ownership, Millennials have a distinct need for affordable vehicles –and are wise decision-makers. Balancing the pros and cons, including prices, of both options available to them can help them find the way to obtain access to the mobility they look for.