Will Gen Z Be Buying Cars?
April 15, 2022
Will Gen Z Be Buying Cars?
Why your car is keeping you from financial wellness.
A car is a depreciating asset, but it turns out, a lot of us don’t really know what that means and what it costs. Up to 50% of people don’t know the actual cost of car ownership. We buy a car because we need a car, not because we necessarily think it’s a great investment. With a decreasing emphasis on ownership, younger generations may be more interested in using something versus owning it. As we try to transition to a more financially empowered, greener future with EVs and subscriptions, I can guess that car buying is going to be one of the first outmoded systems to go. So forget what your car cost you at the dealership. What is it costing you now?
What does my car cost me monthly?
When it comes to car ownership, my friends are a little in the dark. They can’t answer the simple question “How much does your car cost you per month?” The average person might not consider the totality of car expenses. Routine maintenance is often not covered under warranty. Also, the average consumer doesn’t think about depreciation. While you’re not literally writing a check for your car’s depreciating value (despite paying for maintenance, repairs, wear and tear), you are still losing money. For example, a vehicle you bought for $40,000 is only worth $16,000 after five years. A car loses about 15% to 20% of its value a year. So there’s a lot to factor in when breaking down the actual cost of your vehicle and the money you’re losing.
I asked a few friends what their cost of car ownership is per month.
“My car is paid off” was the general answer.
I had to explain that I wasn’t asking about their car payment, but was instead asking about their cost of ownership.
Given that 50% I mentioned earlier, this isn’t unusual. So many of us seem to be ignorant when it comes to what our car is costing us.
Car ownership requires financial literacy.
My good friend got her Mazda CX-5 used from CarMax in 2016. She spent about $25,000. I asked her, “Do you know what it’s worth now?”
“No,” she replied. “Probably less than that.”
Cars depreciate the minute you drive them off the lot. So it’s definitely less than that. And by a lot. Like I said, your car’s “salvage value” or “residual value” (which is the price it’s worth when you are done with it) is often overlooked as a factor in the cost of ownership. And when you’re buying used, you are going to have a higher maintenance cost. So low cost of ownership doesn’t just depend on finding a fuel-efficient car in good condition; it also depends on the value your car is losing every day. My point is, a car is a terrible investment. While buying a car is a big financial decision and often one of the most important purchases of someone’s life, they just don’t retain their value. This keeps you even more locked into using a car you’ve outgrown because it makes more sense to just keep driving it than to sell it for a fraction of what you bought it for.
What is my alternative to car buying?
Car subscriptions might be the next best thing. They’re generally cheaper than a loan or lease and carry far less commitment. There are so many great and practical reasons to try subscribing to your next car. Maybe you’re only in town for three months, you’re expecting your family to grow, or you just don’t feel like committing to a car for six years and you hate debt. The best car subscription services give you the freedom to move, be mobile, and know that your wheels aren’t a life sentence. With a car subscription, you aren’t on the hook for depreciation, but you can use the car for as long as you like.
Now you can subscribe to a Tesla Model 3.
Autonomy is a new Tesla subscription service that allows you to reserve a Tesla in under 10 minutes and get behind the wheel in less than a week. It’s a high-tech, flexible solution to the burden of car ownership. And you can do everything from the app. So many of us live on our phones these days, it helps to have everything in one place. If you’ve always wanted to try an EV but couldn’t afford to buy one or didn’t want the commitment, now is your chance. Or if you’ve simply been waiting for a Model 3, fear not! You can get one now. Let’s drive into a financially empowered, greener future together. It’s what the kids are doing these days.
Lily Donat has a degree in psychology. She writes about current trends in automotive that affect her generation. Lily also has a magazine editorial and creative writing background and is a singer-songwriter.