Comment 79629

By Sigma Cub (anonymous) | Posted August 09, 2012 at 11:42:18

National Post, Aug 9, 2012

Renting is safer than buying
Financial crisis makes young adults too insecure to make major purchases


Cliff Zukin, a professor of public policy and political science at the Edward J. Bloustein School of Planning and Public Policy at Rutgers, the state university of New Jersey, says this is a generation that is scared of commitment and wants to be "light on their feet."

"What once was seen as a solid investment, like a house or a car, is now seen as a ball and chain with a lot of risk to it."
One key difference is that technology now allows companies to provide younger consumers access to what they want, when they want it and at a reduced cost, said Paco Underhill, founder of New York-based consumerbehaviour research and consulting firm Envirosell.

"Renting is something that is in play that wasn't in play during the Great Depression," he said. "To a modern generation, ownership isn't about having it forever, it is about having it when you need to have it."

Enterprise Holdings Inc. and Hertz Global Holdings Inc. are expanding in what the Santa Monica, Calif.-based research firm IBISWorld estimates to be the US$1.8-billion hourly car-rental business, a segment dominated by younger drivers and made popular by Zipcar Inc.

Startups such as Rent the Runway Inc. are supplying high-fashion apparel to satisfy those who want to wear, not own. CORT, a unit of Warren Buffett's Berkshire Hathaway Inc., is increasing its furniture-rental marketing efforts to college students and fledgling households, said Mark Koepsell, CORT's senior vice president.

"Renting makes a lot of sense," said David Blanch flower, professor of economics at Dartmouth College in New Hampshire. "They have no money and they are not buying fridges and they are not buying the things they normally buy when they set up homes. Their incomes are a lot lower."

College graduates earned less coming out of the recession, according to a May study by the John J. Heldrich Center for Workforce Development at Rutgers. Those graduating during 2009 to 2011 earned a median salary in their starting job US$3,000 less than the US$30,000 seen in 2007. The majority of students owed US$20,000 to pay off their education, and 40% of the 444 college graduates surveyed said their loan debt is causing them to delay major purchases such as a house or a car. The U.S. Consumer Financial Protection Bureau said in March it appeared student loans had reached US$1-trillion "several months" earlier.….

The shifting attitudes also pose a threat to retail sales, said Candace Corlett, president of New York-based retail strategy firm WSL Strategic Retail. Younger consumers are already comfortable buying used items and borrowing from friends. Renting will only reinforce their tendency not to buy new. "In a post-recession economy where retailers are trying to make every shopper count, it's the wrong direction," she said.

Shifting attitudes about larger purchases aren't the only reason preventing young consumers from buying. Stricter lending practices and higher requirements for down payments on houses and cars are crowding out buyers, said Prof. Blanchflower, the Dartmouth economist.

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