Gone are the days when a 10-year-old car with 100,000 miles was called a beater.
A new report finds the average age of a vehicle in the U.S. has climbed to an all-time high of 11.6 years, as drivers stretch out their payments on cars and trucks that are holding up longer.
This aging fleet of vehicles, reported by the IHS Markit consulting firm, is good news for many in the auto industry, as it signals a looming wave of consumer spending on replacement vehicles and parts.
“People [in the past] hung on to their vehicles for 100,000 miles and that was a pretty good stretch for that vehicle,” said IHS Markit’s Mark Seng. “Now, when that vehicle is 11.5 or 11.6 years old, you are talking 110,000 or 115,000 miles and it is halfway through its life.”
According to IHS Markit, which analyzes vehicle registration data, almost 1 in 4 vehicles in the U.S. was built before 2001. The firm predicts that in 2021, some 20 million vehicles on the road will be at least 25 years old.
The reasons are twofold. For one, longer-lasting vehicles give drivers “a lot more confidence” in their older cars and trucks. For another, the rise in new and used vehicle prices has caused consumers to stretch out their auto loan payments.
According to Experian’s latest data, the average term for an auto loan is five years and six months. That compares with five years and two months in 2009.
Despite concerns that the industry has plateaued, many automakers expect the aging fleet of vehicles to keep sales of new cars and trucks near a record pace over the next several years. Meanwhile, auto dealers are cashing in on the trend, which provides them more opportunities to service drivers’ vehicles. That is the most profitable part of a dealer’s business.
When it comes to consumers trading up to a new set of wheels, Seng noted that the older fleet of cars and trucks was built long before there was talk about autonomous drive.
“We are beginning to see the technology that is going to be required to support the autonomous vehicles 20 years from now, and that is going to force consumers to want to go out and get this new technology,” he said. “That’s why we see new light vehicle sales remaining strong in years to come.”
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