New research, from Australian car subscription software company Loopit, has revealed a generational shift in how Australians are managing their money, from financial investments to car ownership. With interest rates at record lows and real estate prices soaring beyond reach, it found that more younger Australians are having to put their money to work in alternative investments like the stock market and cryptocurrencies as a means to get ahead financially.
According to the research, the majority of young people (61 per cent) have one or more financial investments, compared to only 40 per cent of older Australians. The data found that younger generations are turning to investments outside their super and primary dwelling at higher rates than older generations, with 66 per cent of young people investing in cryptocurrencies, compared to only 6 per cent of older Australians.
This trend of young Australians more actively managing their money is changing the way they get behind the wheel of a brand new car as well, with many considering more financially viable alternatives such as car subscription rather than falling for the negative equity trap that often comes from financing a new car.
The younger generation no longer sees value in tying up their cash in a new car, and paying interest on a depreciating asset, with research showing that millennials are driving the popularity of more flexible alternatives to car ownership, such as subscription. According to the study, 68 per cent of young people would consider subscribing to their next car, compared to just 46 per cent of older Australians.
Car subscription allows you to get behind the wheel of a new car through small weekly payments with no long-term contract, no interest, no balloon payments and all on-road costs included like registration, insurance and maintenance. This means you can return a car when you no longer need it or swap it for a different car if your needs change. The new data highlights that younger Australians would rather put the money they would otherwise spend on a car to work in other investments like the stock market and cryptocurrencies.
With young people now enduring their second ‘once-in-a-lifetime’ economic crisis, they are left with no choice but to become more financially savvy with their money, says Michael Higgins, Co-Founder and Managing Director at Loopit: “Younger Australians are intent on making their money work harder, simply because they have no other choice. The idea of paying interest on a car loan over five years for a depreciating asset just doesn’t stack up anymore for our generation like it did for the Boomers.”
“They’d rather see that money put to work in the stock market or towards buying a first home. Most importantly, a car subscription doesn’t tie up their funds - so they can continue investing or working toward their first home savings goal.”
Not only does the research highlight a generational shift in how Australians are managing their money, it shows a broader link between financial investments and car subscription. According to the data, people with investments such as stocks, cryptocurrencies and property are more likely to subscribe to their next car than buy it outright. A massive 75 per cent of Aussies with financial investments would consider subscribing to their next car rather than buying it - this figure drops to just 45 per cent for people without any investments.
Interestingly, the data also showed a link between financial investments and electric vehicle (EV) adoption. A massive 81 per cent of Aussies who have financial investments are more likely to drive an EV in the next five years, with subscription being their preferred way to get behind the wheel. The data shows 64 per cent would prefer to subscribe to an EV than buy it outright. According to Paul Higgins, Co-Founder and Managing Director at HelloCars, this highlights that drivers are looking for a more flexible and affordable alternative to upgrading their car.
“Many car manufacturers have already committed to going fully electric in the near future - Ford and Volvo are planning to only sell electric cars by the end of the decade. Australia has so far been slower to adapt to EVs, but this research shows there’s definitely interest there. Even though EVs are around the corner, cost has been cited as the biggest barrier for Aussie drivers - even the most affluent people can’t afford to upgrade their car as frequently as subscription allows. People don’t want to commit to buying a new electric car, but the flexibility and affordability of subscription means you can update your car even more often than your phone.” he said.
Car subscription services such as HelloCars have been increasing in popularity since the COVID-19 pandemic. In fact, over the lockdown period, Loopit saw a massive 52 per cent increase in enquiries. The minimum commitment on a car subscription is similar to most mobile phones plans, at approximately $2,000 or equivalent to an iPhone 12 Pro. You don’t need to go directly to a car subscription company either, with many car dealerships now offering the service. There are over 8,000 cars available for subscription across Loopit’s network of dealerships around Australia. So, Aussies can head to the local dealer showroom or even their website and subscribe directly from there.