NEW YORK–The average time vehicles are remaining on the road has set a new record, but that doesn’t mean credit unions will have fewer financing opportunities, according to a new report.
The average age of vehicles on U.S. roadways rose to a record 12.1 years last year, as lofty prices and improved quality prompt owners to hold on to their cars longer, according to new data released by research firm HIS Markit.
It was the first time the average vehicle age rose above 12 years, according to IHS Markit. While the average vehicle age has risen steadily over the last 15 years, the trend accelerated during the coronavirus pandemic partly because of a drop-off in new car sales, HIS said.
Numerous Factors
Todd Campau, associate director of aftermarket solutions at HIS, told the Wall Street Journal the finding reflects the stronger value of vehicles throughout their life cycles, from higher new-vehicle prices Americans have been paying for years to steeper prices on the used car lot. Improved vehicle quality also is a factor, he added.
Whereas 20 years ago a car might have changed hands once or twice and lasted 100,000 miles, it is more common today for a car to have multiple owners and last for 200,000 miles or more, Campau told the Journal. “That has extended the life cycle of the vehicle and created value for more buyers up and down the chain. For that second or third or fourth owner, there’s still meat on the bone.”
The rise in average vehicle age doesn’t necessarily mean Americans are forgoing new-vehicle purchases and making do with their current cars longer, Campau told the Journal. New-vehicle sales have been running at a record or near-record pace for years, with the exception of a short-lived drop in the early months of the pandemic last year, he said.
Instead, according to Campau, since cutting back in the financial crisis more consumers have been adding to their number of household vehicles—buying a third car for the family instead of getting by on two, for example.
More Cars in Operation
The total number of vehicles in operation in the U.S. has risen about 10% since 2013, to around 279 million, according to IHS.
Campau also told the Journal the lengthening vehicle age presents an opportunity for dealerships and other companies that sell aftermarket parts for vehicle repairs, such as brakes and tires.
In addition, more companies are offering aftermarket products to upgrade infotainment systems and other technology in cars, giving owners of older vehicles the ability to connect their phones to the dashboard touch screen, for example.
As CUToday.info reported, the price paid for an average new vehicle in May was $38,255, a record high, according to J.D. Power. Even more astounding, average used-vehicle prices were up 48% in May from a year earlier, according to an index produced by auction company Manheim, Inc.