Have we reached peak age for vehicles on America's roads?

used carsWhat were your customers doing early in 2003?

If they are the proverbial average Americans, then they were buying a car. That’s right, the average car on the road is an astounding 11.4 years old, according to R.L. Polk & Co.

And that raises the question for dealers and remarketers: Has peak age been reached for cars on the road, or should drivers expect to share the road with ever-older vehicles?

The answer to that question depends on who you ask.

“I think the age of cars on the road is peaking,” said Tom Kontos, executive vice president, ADESA analytical services. He sees a surge in new car sales as the greatest force lowering average age.

“People tend to be unaware or forget that the average age of vehicles is driven significantly by new vehicle sales,” he said. “As those sales have recovered, and as they have resumed their normal pattern of exceeding vehicle scrappage, [the] average age will fall – even with vehicles lasting longer.”

Ricky Beggs, editorial director of Black Book, feels that we are over the hump in terms of vehicle age. The average age climbed significantly when hard times kept buyers out of the new car market in 2010 and annual sales plummeted to 10.3 million, Beggs said.

“We reached out to a significant number of franchised dealers in the second half of 2012 and asked them, ‘What was the average age of the trade-ins back in prerecession years?’” Beggs said. “The majority said it was a 3- to 4-year-old car. We then asked them what it was in 2011 and 2012 and the answer was most of the trades were 8 to 11 years old.”

The inquiry was repeated at the end of 2013.

“This time the answer was they were getting some 3- to 4-year-old trades and also still getting some 8- to 11-year-old vehicles,” Beggs said. “This is a sign more people are getting back into the more traditional trade cycles, while those who stayed out of the new car market are now coming back.”

The current growth of leases, which almost disappeared between 2009 and 2011, according to Beggs, also will help reduce the average age of cars out there.
Still, Eric Lyman, managing editor of ALG’s Residual Value Guidebook, sees a different future than Kontos and Beggs and believes that peak age has not yet arrived.

Lyman sees two major factors leading to this: First, vehicle quality is very high and improving steadily, and second, the number of miles being driven by U.S. drivers is declining.

“Millenials aren’t really into cars,” Lyman said. “Road trips are a thing of the past. Urban living is on the rise. Fuel costs are up. All these mean less miles being driven.”
These shifts are here to stay, and we’d do well to get adjusted sooner rather than later, Lyman said. “Better quality cars plus less miles being driven equals longer life of our vehicles.”

In any case, we’re at least several more years before we know the answer to our question.

– Philip Ryan, Royal Media

 

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