Spurred by high car prices, Americans are holding on to their vehicles longer than ever – WOODTV.com
ANN ARBOR, Mich. (AP) – With new and used cars still painfully expensive, Ryan Holdsworth says he plans to keep his 9-year-old Chevy Cruze for at least four more years. Limiting his car payments and total debt is a bigger priority for him than having a new vehicle.
A 35-year-old grocery store worker from Grand Rapids, Michigan, Holdsworth would likely be in the market for a vehicle within a few years — if not for the high cost. For now, it is out of the question.
“You’re not going to get one for a price you can afford,” he said.
Holdsworth has a lot of company. Americans are keeping their cars longer than ever. The average age of a passenger car on the road reached a record 1[ads1]2.5 years this year, according to data compiled by S&P Global Mobility. Sedans like Holdsworths are even older on average – 13.6 years.
Blame it mainly on the pandemic, which in 2020 triggered a global shortage of automotive data chips, the vital component that powers everything from radios to gas pedals to transmissions. The shortage drastically reduced global assembly lines, causing a shortage of new vehicles on dealer lots just as consumers were becoming increasingly eager to buy.
Prices reached record highs. And while they have eased somewhat, the cost of a vehicle still feels prohibitively expensive for many Americans, especially when combined with now much higher mortgage rates.
Since the pandemic hit three years ago, the average new vehicle has risen 24% to nearly $48,000 as of April, according to Edmunds.com. Typical loan rates on new car purchases have risen to 7%, a consequence of the Federal Reserve’s aggressive series of rate hikes to fight inflation.
It’s all pushed the national average monthly car loan payment to $729 — prohibitively high for many. Experts say a family earning the median household income in the United States can no longer afford the average new car payment and still cover such necessities as housing, food and utilities.
Used vehicle prices have risen even more on average since the pandemic hit — up 40%, to nearly $29,000. With an average loan interest rate of 11%, the typical used car monthly payment is now $563.
Faced with a choice between making a jumbo payment and keeping their existing vehicles, more owners are choosing to stick with what they have, even if it means spending more on repairs and maintenance.
Auto mechanics have been hit by the increasing age and mileage of vehicles now arriving at the shop in numbers they had never seen before.
“You see cars all the time in here with 250,000, 300,000 miles,” said Jay Nuber, owner of Japanese Auto Professional Service, a garage near downtown Ann Arbor, Michigan. “They haven’t really had any big work or anything. They have just performed the (routine) service.”
That doesn’t mean that most owners of older cars are necessarily stuck with constant repair bills. One reason people are able to keep their vehicles for increasingly longer periods is that car manufacturing has improved over time. Engines run longer. The bodies do not rust as quickly. Components last longer.
But the cost of buying either a new or used vehicle means that more people essentially have no choice but to keep the one they have.
“The repair-versus-buy equation changed,” said Todd Campau, associate director at S&P. Even with rising repair costs, Campau said, fixing up an older vehicle is still usually more cost-effective than splurging on a purchase.
The average vehicle age, which has been rising since 2019, accelerated this year by a significant three months. And while 12.5 years is the average, Campau noted, several vehicles stay on the road for 20 years or more, sometimes with three or four consecutive owners.
In such cases, the third or fourth owner gets a much older car than they would have had previously. Nearly 122 million vehicles on the road are more than a dozen years old, Campau said. S&P predicts that the number of older vehicles will continue to grow until at least 2028.
Even with more durable vehicles that can last longer, all of this has created a boom time for car dealerships. Throughout most of last year, Nuber’s Japanese Auto was overwhelmed by customers. It took up to three weeks to get an appointment, whether it was for repairs or the routine maintenance that especially older vehicles require.
“The phone just kept ringing, and the cars kept coming,” Nuber said.
It is now at the point where some vehicle owners must decide whether to pay for a repair that costs more than their vehicle is worth. That’s where a lot of them draw the line, said Dave Weber, manager of Japanese Auto.
On Friday, Weber said, a customer needed rear brakes, wheel bearings and exhaust system repairs. The customer decided to do only half of the repairs and wait until later to decide whether to sink more money into the aging vehicle.
“They patch them up and run them that long, until the next big repair,” Weber said.
S&P predicts new car sales in the US will reach 14.5 million this year, up from about 13.9 million last year. A big reason is that the offer at the dealers is finally growing. Automakers have also begun to restore some rebates that have long helped keep a lid on prices. The result is that many people who can afford to buy can now do so. It’s a trend that could slow the aging of the U.S. fleet and boost overall sales.
Still, no one is predicting a return to pre-pandemic annual sales of around 17 million anytime soon. Even with discounts, new vehicle prices are likely to remain much higher than pre-pandemic levels for years to come.
As for Holdsworth, the Chevy Cruze owner, he plans to keep up with scheduled maintenance on his car, especially routine oil changes. Even if he faced a major repair, he thinks he would probably pay for it.
After purchasing his vehicle two years ago, Holdsworth has about two years left in payments. So his Cruze may also reach the 12.5-year-old national average.
“I’ll pay it off,” he said, “and drive it for another couple of years.”