Lang Aftermarket iReport: Millennials embrace vehicle leasing
“Millennials (Americans born between 1980 and 2000) are the largest generation in U.S. history. Sharing is a core value of the Millennial generation and a primary motivation for much of their behavior.
“Millennials’ interest in sharing has shaped their view of vehicle ownership and will influence how this generation will change the automotive aftermarket in the coming years.”
— Jim Lang, publisher, Lang Aftermarket iReport
The Biggest Generation
Millennials are 87 million strong and constitute the largest generation in American history. They will be the driving force of the U.S. economy for the next quarter century.
Access Is the New Ownership
Millennials are more inclined to share things rather than own them. This tendency has been shaped by a number of factors, not the least of which have been the 2008 Great Recession and the burden of student loans carried by many Millennials.
Access is the new ownership for Millennials. Many Millennials are not as motivated to be owners of “stuff” as previous generations have been (particularly Baby Boomers). Millennials prefer to have access to the benefits of things without owning them, particularly new, high cost and trendy items.
Vehicle Leasing Over Vehicle Ownership
Vehicle leasing is more appealing than vehicle ownership to many Millennials, given their reluctance to acquire high-value assets.
Millennials have been responsible for much of the surge in vehicle leasing.
Vehicle leasing by Millennials has soared over the past five years. The interest of Millennials in Electric Vehicles (Battery Electric Vehicles and Plug-In Hybrids) has bolstered the significance of Millennials to the leasing market because most Electric Vehicles are leased rather than purchased.
Vehicle Leasing and the Used Vehicle Market
The sharp increase in vehicle leasing led to a flood of vehicles coming off lease that is increasing the size of the used vehicle market.
Impact on the Aftermarket
The growing number of leased vehicles has three significant consequences for the aftermarket.
First, leased vehicles are more likely to be taken to Dealers for service rather than are purchased vehicles. This boosts Dealer service bay volume at the expense of Independent (non-Dealer) repair outlets.
Reconditioning of Used Vehicles
The second way in which leasing impacts the aftermarket is the growing number of vehicles that will come off lease over the next several years, which will lead to a surge in reconditioning volume by Dealers as they repair used vehicles to make them ready for resale.
Reconditioning performed by Dealers takes business from Independent (non-Dealer) shops and increases the average vehicle age at which key repair parts (Brakes, Suspension Parts, etc.) are first replaced by Independent shops.
Over $25 Billion in Parts and Labor
Lang Marketing estimates that these developments (leased vehicles returned to Dealers for service and the reconditioning of leased vehicles to make them ready for resale) will total over $25 billion in parts and labor during 2020 through 2022, all which will go to Dealers rather Independent (non-Dealer) repair outlets.
Used Vehicles and Dealer Bay Promotion
Third, when Dealers sell used vehicles (many which come off lease) they encourage buyers to return to the Dealer for repairs and maintenance, taking business from Independent (non-Dealer) repair outlets.
Six Major Takeaways
- The over 87 million Millennials in the U.S. comprise the largest generation in U.S. history. The 2008 Great Recession and the burden of student loans has made Millennials more inclined to share things rather own them.
- Many Millennials find vehicle leasing very appealing since it gives them access to new vehicles without the burden of ownership.
- Increased vehicle leasing, fueled by Millennials, will lead to an unprecedented growth in the used vehicle market (as vehicles come off lease) over the coming years.
- Vehicle leasing boosts Dealer repair volume because leased vehicles are more likely to be returned to Dealers for service and vehicles coming off leasing provide a reconditioning market for Dealers.
- Lang Marketing estimates that over $25 billion in parts and labor will accrue to Dealers over the next five years for the repair and maintenance of leased vehicles and the reconditioning of off-lease vehicles for resale.
- When Dealers sell used vehicles (many of which have come off lease), they can promote their bays as a service resource for these vehicles, retaining these buyers as Dealer bay customers.
Copyright 2020 by Lang Marketing Resources, Inc.
NOTE: Special thanks to publisher Jim Lang for granting us permission to publish the Lang Aftermarket iReport.