A TREND of actively managing finances by young Australians is changing how they use a car, according to a survey by subscription service provider Loopit.

It said 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.

The survey by Loopit found that more younger Australians are financially locked out of high-dollar investments in real estate and are investing in the share market and cryptocurrencies.

It said that 61 per cent of the young people surveyed have one or more financial investments, compared to only 40 per cent of older Australians. It said that youth 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 six per cent of older Australians.

Because they prefer not to tie up their money in major investments, Loopit argues they are more willing to consider subscribing to their next car rather than owning a car.

The survey said that 68 per cent of young people would consider a car subscription service compared to 46 per cent of older Australians.

Loopit co-founder and managing director Michael Higgins said: “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 Baby Boomers,” he said.

The survey material from Loopit also found that 85 per cent of respondents who were motorists were underestimating the real cost of owning a car by as much as $5000 a year.

Mr Higgins said there was a clear misconception that buying a new car through traditional means like finance or an outright purchase is the most affordable way to get behind the wheel.

“Many car owners and buyers use ‘back of the napkin’ math when estimating the cost of car ownership,” he said.

“Once you consider interest, loan repayments, fuel, insurance, maintenance, servicing, registration and depreciation – it all adds up.

“Even in a straight apples-to-apples comparison, car subscription is quickly becoming the more affordable way to get behind the wheel of a new car.”

The latest Australian Automobile Association Transport Affordability Index shows transport costs have exploded in the first quarter of 2021, increasing by over $2000 on average since last year.

In the first quarter of 2021, the AAA found that Australian households have spent more on transport than any other time in the past five years.

It said the average weekly cost of owning a car was $354 or almost $18,500 a year.

Mr Higgins said the vast majority of motorists underestimate this figure by a significant margin.

Loopit’s research found that the highest number of Australians – 36 per cent – believed the average car costs between $2000-$3000 to run, followed by 27 per cent who said $3000-$5000.

Just over one fifth of respondents (21.5 per cent) believed that car ownership costs less than $2000, while only 11 per cent said $5000-$10,000.

By Neil Dowling