As the dream of owning a home becomes increasingly out of reach for many young Brits, Generation Rent is facing a whole new challenge.
For young professionals living in cities like London, the economic benefits of owning a car no longer make sense.
“Owning a car is getting harder and harder, and it's getting harder and harder to drive a car,” says Andrew Smith, managing director of Sixt, a car rental company.
Driving is on track to become to become “fundamentally different,” Smith says. Soon, instead of owning cars, people will share them, he adds. “I believe this is the future.”
Nearly a third of motorists are driving less as they seek to cut costs since the cost of living crisis began, according to a Sixt survey. More than half consider owning a car a financial burden.
“Drivers are currently suffering from record-high vehicle costs,” says AA President Edmund King.
Petrol prices have risen by a fifth since October 2019.
Motor insurance premiums have risen 29% over the past 12 months to a record high of £561 as material and labor shortages drive up job costs, according to the Association of British Insurers.
The AA has warned that some insurers are removing windscreen cover in an attempt to offer cheaper policies.
The upfront costs of buying a car have also risen. Used car prices have soared during the pandemic supply chain crisis when a chip shortage hit new car supplies and they have not returned to normal levels.
According to AA Cars, the price of a used Toyota Aygos has jumped 16% since August 2021, with the Vauxhall Corsa up 12% and the VW Polo 8% more expensive.
“It's usually only classic or collector cars that rise in price,” says King.
In London, many drivers have also been affected by the expansion of the ultra-low emission zone (Ulez), announced last November. As a result, many motorists have already sold their cars.
“We now see clients coming to us every Friday and renting a car just for the weekend to go out of town, maybe visit a second home or meet up with family outside London,” says Smith. “They say, 'It's actually a much more economical way of living.'”
Drivers are also turning to monthly car subscriptions instead of leasing, Smith says.
“We are seeing a still small but rapidly growing circle of clients who say, “I have a three-month work project.” I’ll take the car for three months instead of buying an asset and hoping the project lasts,” he adds.
Sixt's subscription is small, but growing quickly. In October, the number of orders increased by 329% compared to the same period last year.
Young professionals are at the center of the transition.
“They don't have that attachment to property. They would rather not spend a lot of capital expenditure on an asset that is very rarely used,” says Smith. Young people are also more likely to rent apartments without parking spaces, he adds.
In Scandinavia, Smith says many Sixt customers go car-free in the summer, when they take advantage of the warm weather and get around by public transport or bike, saving car rentals for the colder, darker winter months.
Driving is possible gradually goes out of fashion. The distances traveled by car users had already fallen before the pandemic. Between 2002 and 2019, drivers' annual mileage fell by about 13%, according to government data.
Naturally, this figure fell sharply in 2020, when the country was under quarantine. But it has not recovered in 2021. In fact, he fell further.
The distance traveled by drivers in 2021 was 40% less than in 2002. The majority of these trips were made by people between the ages of 40 and 69.
“There has been a steady decline because owning a car is becoming more expensive,” says James Arbib, co-founder of the think tank RethinkX. “We're in a cost-of-living crisis right now, and we have more work flexibility.”
But all these changes are just the beginning of what will become an inevitable, complete overhaul of driving, Arbib says. Millennials and Generation Z are simply ahead of the curve.
“Autonomous vehicles will really usher in the end of motorization,” he says.
Currently, car sharing suffers from the same inefficiencies as bike sharing, namely that they are left in places where people don't need them, Arbib says. He believes that self-driving cars will solve this problem.
This will be due to the transition to electric vehicles. According to Arbib, electric vehicles have far fewer moving parts than traditional gasoline cars and will therefore have a much longer lifespan.
“We expect electric vehicles to last a million miles,” he says. That's about five times more than a typical car today.
“But a million miles in your life are useless if you have a car.”
The average person in 2021, according to the government I have driven the car 2229 miles. The typical car owner won't benefit if their car's lifespan is extended, but they'll still have to pay for it.
In turn, driving will shift to fleet-driven models, Arbib says.
In turn, driving will shift to fleet-driven models.
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“If you can divide the original cost of a car over a million or more miles, the cost comes down dramatically,” he says, adding that maintenance costs for electric vehicles are also much lower.
>This will open up the prospect of a lot of new business -models. Automotive stock companies can monetize their services through advertising, sponsorships and data collection rather than through commissions, Arbib says. “In cities you can see free transport.”
Of course, there is a big difference between urban and rural areas. The more dispersed the population, the less effective the alternatives to car ownership will be. But governments could offer subsidy programs for less densely populated areas.
The Sixt survey also showed high levels of attachment to car ownership. For many people, cars offer independence and comfort that carpooling cannot. Can self-driving cars overcome this?
“We used to love riding horses. This psychological aspect is not really a barrier when we get alternative modes of transport that are much cheaper and more efficient,” says Arbib.
“There are still people who ride horses every day, but not for transportation. It will be the same,” says Arbib. It will simply be the “heritage market.”
Have you found that owning a car no longer makes sense? Let us know why in the comments section below.
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