With new and used cars still too expensive, Ryan Holdsworth says he plans to keep his 9-year-old Chevy Cruze for at least four more years. Limiting her car payment and overall debt is a higher priority for her than owning a new vehicle.
Holdsworth, a 35-year-old grocery store employee from Grand Rapids, Michigan, probably would be looking for a vehicle on the market in a few years if it weren’t for the high cost. For now, that’s out of the question.
“You’re not going to get one for a price you can afford,” he argues.
Holdsworth has a lot of company. Americans keep their cars longer than ever. The average age of a passenger vehicle in 2023 is set to reach a record high of 12.5 years, according to data compiled by S&P Global Mobility. Sedans like the Holdsworth are even older, averaging 13.6 years.
The blame lies primarily with the pandemic, which in 2020 triggered a global shortage of car computer chips, the critical component that powers everything from radios to gas pedals to transmissions. The shortage dramatically slowed global assembly lines, making new vehicles scarce at dealers as consumers became eager to buy.
Prices reached an all-time high. And while they have gotten somewhat easier, many Americans still find the cost of a vehicle too expensive, especially when combined with the now very high loan rates.
According to Edmunds.com, the average new vehicle price in April rose 24% to nearly $48,000 from three years ago due to the pandemic. Typical new car loan rates have climbed up to 7% due to an aggressive streak of raising interest rates by the Federal Reserve to combat inflation.
This has pushed the national average monthly auto loan payment to $729, which for many is prohibitively high. Experts say the average American income-earning family can no longer afford the average new car and still meet necessities such as housing, food and utilities.
Average used car prices have gone up even more since the pandemic hit: 40% higher, to almost $29,000. With the average loan rate reaching 11%, the typical monthly payment for a used vehicle is now $563.
Faced with the decision between making a hefty down 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.
Due to increasing age and mileage, auto mechanics are now reaching the shop in such numbers, which they had never seen before.
“You see cars with 250,000, 300,000 miles here all the time,” said Jay Nuber, owner of Japanese Auto Professional Service, a repair shop near downtown Ann Arbor, Michigan. “He didn’t really have an important job or anything. He’s just doing (regular) service.”
This does not mean that most older vehicle owners are stuck with constant repair bills. One of the reasons people have been able to keep their vehicles longer is because car manufacturing has improved. Engines last longer. The body does not rust that fast. Components last a long time.
However, the cost of buying a new or used vehicle is rising, leaving more people with essentially no choice but to keep the one they have.
“The repair versus buy equation has changed,” said Todd Campau, an associate director at S&P. Despite the rising cost of repairs, Campau said, repairing is still more cost-effective than buying an older vehicle.
The average age of vehicles, which has been on the rise since 2019, saw a substantial increase of three months this year. And while 12.5 years is the average, Campau said, more 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 car that is much older than the first. Campau said about 122 million vehicles on the road are more than a dozen years old. S&P predicts that the number of used vehicles will continue to grow until at least 2028.
All this, even with more durable vehicles, has made for boom times for auto shops. Over the past year, Nuber’s Japanese auto has been inundated with customers. It used to take up to three weeks to get an appointment especially for older vehicles for repair or routine maintenance.
“The phone kept ringing and the cars kept coming,” Nuber said.
You are now at the point where some vehicle owners must decide whether or not to pay for repairs that cost more than the value of their vehicle. 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 brake, wheel bearing and exhaust system repairs. The customer decided to do only half the repairs and wait until later to decide whether to invest more money in the old vehicle.
“They fix them up and haul them around until the next major overhaul,” Weber said.
S&P estimates new vehicle sales in the US will reach 14.5 million this year, up from 13.9 million last year. One of the major reasons is that the offers at the dealerships are finally increasing. Automakers have also started reinstating some of the discounts that helped keep prices in check for a long time. The result is that many people who can buy now can. It’s a trend that could slow the aging of the US fleet and boost overall sales.
Still, no one predicts a return to pre-pandemic annual sales of around 17 million anytime soon. Even with the discounts, prices of new vehicles are likely to remain much higher than pre-pandemic levels in the coming years.
As for Holdsworth, who owns a Chevy Cruze, he plans to keep up with his car’s scheduled maintenance, specifically regular oil changes. Even if you are faced with a major repair, you will probably find yourself paying for it.
After purchasing his vehicle two years ago, Holdsworth has about two years of payments left. So your cruise may even touch the national average of 12.5 years.
“I’ll end up paying it off,” he said, “and run it for a few more years.”
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