If this happens two things are certain: The average car on American roads is more than 12 years old, and the average new car costs more than $45,000.
This is a formula for declining new car sales, especially when there is a recession. And this slowdown in the industry is surpassing the European one, which is calculated from the useful use of a new car in 10 years.
S&P Mobility says the average age of an American car is 12.5 years.
That’s more than less than 10 years ago two decades ago. One of the tenets of why cars last longer is that they are better built and don’t fall apart as quickly as cars at the turn of the century. But the truth is not like this.
It’s a fact that a Great Recession may have made people hold onto cars for longer. Everyone understands.
The average price of a new car sold in the United States is around $48,000, which is insane compared to 10 years ago.
This puts many cars out of the financial reach of people, so they keep their older cars for longer.
This collapse of the industry creates a kind of cycle
Manufacturers don’t care, because they make less but earn more, setting very high prices.
This trend is a temporary profit bonanza for auto companies, as higher prices also increase margins, but at what cost?
Car companies will enjoy their newfound profits for a few years, if not less. As the prices of new cars go up, people will keep their cars longer. The average age of a vehicle will be pushed towards 15 years.
Automotive companies will find that the universe of buyers is shrinking. If interest rates remain high, financing a new car will cost more.
This is a perfect storm against manufacturers, who will not be overwhelmed by overloaded orders, and who will take advantage of the prices at the expense of the consumer.
About 20 years ago, an immigrant could come in, work for a year, settle down, and get the new car of his dreams. To be able to compare it to your home at age 5. This has already happened, the United States has ceased to be a cheap country, becoming expensive with new cars that are no longer available to everyone.
