Even before the coronavirus pandemic hit the U.S., researchers had already concluded that Americans are holding onto their cars for a longer period of time: nearly 12 years. That's the highest figure in almost 20 years.
The auto industry information gurus at IHS Markit have just released their latest study analyzing the age of vehicles on U.S. roads, and while you may think this has everything to do with boosting new car sales, an old vehicle fleet on the road also does no good for emissions and safety concerns. Newer cars are (generally) far more fuel efficient than older vehicles.
The average age of a vehicle in operation increased to 11.9 years, up one month from last year. All signs already pointed to few fluctuations from the year prior, but the pandemic could very well inflate the figure higher. New vehicle sales last year accounted for just 6.1 percent of vehicles in operation, and IHS Markit estimates we could see the figure drop to 5 percent or less. Fewer new cars on the road will increase the average age in studies to come.
Interestingly, scrappage rates, or the number of older cars retired and off U.S. roads, increased. Typically, that would make room for new vehicles to hit the road, but the research showed a sharp decline in new car sales created the perfect storm for an aging vehicle fleet. Increased new vehicle prices and longer-term financing also play a part. Buyers may simply keep an older car because they can't afford a new one. Or, increasingly popular 72- and 84-month financing may lock buyers in for a longer period of time.
IHS Markit expects the average vehicle age to only grow in the immediate future as more households look at spending habits and navigate the "new normal," even post-COVID-19.
But there's a silver lining for one industry: the aftermarket. As Americans continue to drive older cars, they'll need repairs, and aftermarket companies by and large fulfill the need. Whether it's parts or general servicing, the sector is poised for growth.
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