Millennials spend just as much on car finance as rent
One in five (20%) millennials (under 34s) pay as much for their car each month as their rent or mortgage, according to a new Opinium survey* of 2000 UK drivers, with almost half (42%) saying that having a nice car is a symbol of status.
Over a third (37%) of millennials prefer to pay for a car on a monthly basis using finance methods, including leasing, hire purchase or a loan, rather than worrying about a car’s total cost because they know they can upgrade when the finance contract runs out. 43% drive a brand-new car, and 56% drive a second-hand car.
On average, the survey, which was commissioned by InsuretheGap.com, an independent provider of GAP (Guaranteed Asset Protection) insurance for new and second-hand cars, found that 39% of millennial car owners bought their car outright via cash or debit card, with 12% bought using hire purchase agreements, 11% on PCH (personal contract hire), 6% with privately arranged finance and 5% on lease. 4% of millennials were lucky enough to receive a car as a present.
After mortgage or rent payments, almost half (49%) of millennials say the car is their next biggest expense, however 82% say they would be held back if they did not have a car and 75% say it is essential to their everyday life. 56% report that public transport in their area is patchy and unreliable.
For some millennials, change might be afoot as almost one in five (18%) say that they are planning to use car clubs and ad hoc car rentals to save on the cost of owning a car in the future.
Ben Wooltorton, Chief Operating Officer, InsuretheGap.com said: “Half of millennials told us that they can’t get to work without a car, so despite the high costs involved in owning and running a car many don’t have a choice. Those in rural areas felt this even more strongly.
“When so much of their income is going on a car, drivers should be protecting their investment. If a car is written off or stolen, the insurance company will usually only pay the market value of the car, not what was paid for it, so drivers could face a financial shortfall, particularly if they still have a finance agreement or loan to pay off. A GAP insurance policy from a specialist insurance provider, like InsuretheGap, protects drivers from this.”
In 2015 the Financial Conduct Authority (FCA) clamped down on dealerships selling GAP insurance and introduced a two-day breathing space period to allow consumers to shop around and not feel pressurised by the face-to-face sales environment.
InsuretheGap.com’s policies start from just £54.55* and are significantly cheaper than those offered by car dealerships. Cover is available for vehicles worth up to £150,000, covering gaps up to £50,000.
* The starting price for InsuretheGap.com policies is £54.55 (Return to invoice for a car worth £9,999)