From horse to car and now to multimodal conveyance, personal mobility has reached another inflection point. Today, the future of mobility is shared, multimodal, sustainable, electric, and increasingly connected and autonomous. The importance of having access to a private vehicle, however, has not vanished for most consumers: fewer than 15 percent of current car owners say they would consider replacing their private vehicle entirely with other forms of transport in the next decade. But there is change afoot: the types of vehicles people use and how they use them are changing from traditional asset ownership models to more flexible-access models.
In terms of ownership flexibility, many options are available, from cash purchases to leasing to monthly subscriptions to pay-per-use models. Our findings are based on our regular McKinsey Mobility Consumer Pulse survey that included over 4,000 respondents from France, Germany, and the United Kingdom. Among respondents, 60 percent indicated that they own a car; 80 percent had regular access to one; and fewer than 10 percent leased vehicles.
This article focuses on leasing, which is currently the most commonly used flexible-ownership form and typically involves contracts that run 12 to 36 months. Our study suggests that the leasing model offers consumers many convenient advantages over owning a car outright. For instance, those who lease do not have to worry about selling a used car at the end of the ownership cycle and can take advantage of all-in service packages under leasing contracts. Leasing also allows for monthly financial flexibility.
Consumers value leasing’s flexibility more today but are puzzled by its details
Consumers say they prefer the shift toward more flexible ownership forms like vehicle leasing. For their next vehicle purchase, about twice as many consumers say they would choose leasing over their current ownership situation. This shift comes at the expense of both traditional outright car purchase and credit financing deals.
Although most people are familiar with the concept of leasing, close to 60 percent of consumers in our survey who do not currently lease vehicles could not explain its basic workings to a friend (Exhibit 1). Among consumers who would not choose leasing at their next vehicle purchase, many cite a lack of knowledge about this option as their reason. The other major deterrents were a fear of hidden costs and the financial burden. Even those who already lease lack knowledge about basic leasing features. For instance, nearly a quarter do not know who owns the car or falsely believe they do, and 15 percent of those who lease do not know what the leasing kilometer limit stands for, highlighting the need for education on leasing.
More than 70 percent of respondents do not trust a leasing quote and are worried about hidden charges, so simplicity is key for consumers when it comes to leasing. Nearly 60 percent would value a simple one-page summary about leasing rate composition, associated charges, and key contract details. This marks a clear call to action for leasing providers in the private-vehicle market to make leasing “simply simple” so that flexible vehicle ownership models live up to consumer demands.
Can leasing be the electrification engine for Europe?
The attractiveness of vehicle leasing becomes substantially higher as consumers shift to electric vehicles (EVs). Our results indicate that leasing is about two times more likely to be the ownership preference for consumers who choose an EV over a traditional internal-combustion-engine (ICE) car (Exhibit 2). This may be rooted in people’s uncertainty about technology maturity, battery lifetime, and EV used-car markets. Half of consumers say their next car will be electric, so vehicle leasing can provide a means to reduce adoption barriers and help accelerate the decarbonization of passenger car mobility across Europe.
European consumers say they are ready for more flexible car access models, but many remain confused about fundamental offerings such as leases, which seem tailored to handle some of the issues associated with EVs. To overcome this roadblock, finance industry players can launch effective educational programs that simplify the specifics of leasing and explain how it works.