Given the high prices of new and used cars, Ryan Holdsworth says he plans to keep his nine-year-old Chevy Cruze for at least four more years. Lowering the down payment and his overall loan is more important to him than getting a new vehicle.
The 35-year-old grocery store clerk says he’d buy a new vehicle every few years if it weren’t for the prices. For now, don’t even think about it. “You don’t get this at a cheap price,” he charges.
Holdsworth is far from the only one who thinks so. Americans are keeping their cars longer than ever. According to S&P Global Mobility, the average age of a passenger vehicle on the road increased to 12.5 years this year, a record. Sedans like the Holdsworth are even older: 13.6 years on average.
The main fault lies with the pandemic, which has caused a global shortage in 2020 of microchips for automotive computers, the key component that controls everything from radios to throttles and transmissions. The shortage caused a severe slowdown in the global assembly line, and vehicles became scarce when consumers were eager to buy.
Prices have reached record highs, and while they are down slightly, the cost of a vehicle is too high for many Americans, especially now that interest rates on loans are so high.
According to Edmunds.com, since the start of the pandemic three years ago, the average new vehicle price in April rose 24% to nearly $48,000. The policy of aggressively raising rates to combat inflation has resulted in interest rates on new car loans being increased to 7%.
With all of this, the average monthly payment for a car loan has risen to $729, which is cost prohibitive for many people. Experts say a middle-income family can no longer afford a new car and cover basic costs such as housing, food and utilities.
The average price of a used vehicle has risen 40% since the pandemic to nearly $29,000. Added to this, at the average rate on a loan, at 11%, the typical monthly payment for a used car is $563.
Faced with the decision between paying the same prices or keeping their current vehicle, more and more are choosing the latter, even though it increases repair and maintenance costs.
Auto mechanics look in amazement at the increasing age and mileage of vehicles arriving at their shops in unprecedented numbers.
“You see cars with 250,000, 300,000 miles (400,000 to 480,000 km),” says Jay Nuber, owner of Japanese Auto Professional Service, a repair shop in Ann Arbor, Michigan. “They don’t need a lot of work. They only come for routine maintenance,” he adds.
This does not mean that most older vehicle owners have to pay for frequent repairs. One of the reasons people have been able to keep their vehicles longer is because manufacturing has improved over time. Engines last longer. The body does not rust quickly. Components are more durable.
Anyway, the cost of a new or used car is so high that more and more people have no option but to keep their vehicle.
“The repair-versus-buy equation has changed,” says S&P manager Todd Campau. Even with the cost of repairs rising, fixing an old vehicle is usually cheaper than shelling out money for a new one, he says.
The average age of vehicles, which has increased since 2019, has increased by three months this year. And while 12.5 years is the average, Campau says, more and more vehicles have been on the road for 20 years or more, sometimes with three or four consecutive owners.
In these cases, the third or fourth owner buys a car that is much older than the first car. About 122 million vehicles in circulation are more than 12 years old, says Campau. S&P estimates that the number of used vehicles on the roads in the United States will continue to grow until at least 2028.
Although vehicles are more durable, all this has generated a boom for mechanical workshops. Over the past year, Nuber’s Japanese auto has been flooded with customers.
It used to take up to three weeks to get an appointment, be it for repairs or routine maintenance of old cars. “The phones won’t stop ringing and the cars won’t stop coming by,” Nuber says.
It has gotten to the point where some owners must decide whether or not to pay for repairs that exceed the value of their vehicle. That’s where many people decide to switch, says Dave Weber, manager of Japanese Auto.
Recently, Weber says, a customer needed rear brake, wheel bearings and exhaust system parts. The customer decides to do half the repairs and then decide whether to spend more money on the old vehicle.
“They patch them up and wear them until the next major repair,” says Weber.
S&P estimates that 14.5 million new vehicles will be sold in the United States this year, compared to 13.9 million last year. One of the reasons for this is the increase in offers at the dealerships again. Manufacturers have started reinstating some of the discounts that have helped limit the price hike over a long period of time. So many people in the buying position can do so. It’s a trend that could slow the aging of the US car fleet and boost sales.
Still, no one predicts a return to anywhere near pre-pandemic sales of 17 million new cars per year. Despite the waiver, new vehicle prices are likely to be much higher than they were before the pandemic for several years.
As for Holdsworth, a Chevy Cruze owner, he plans to continue with regular maintenance, specifically oil changes. And if you have to do any major repairs, you probably will.
After purchasing your vehicle two years ago, you have roughly two years of payments left to make. So your cruise will probably hit the national average of 12.5 years. “I’ll end up paying it off and will be using it for the next few years,” he says.