With new and used cars still very expensive, Ryan Holdsworth plans to keep his 9-year-old Chevy Cruze for at least four more years. Limiting his car payments and overall debt is a higher priority for him than buying a new vehicle.
Holdsworth, a 35-year-old grocer from Grand Rapids, Michigan, would probably be looking for a vehicle in a couple of years – if not for the high cost. That’s out of the question at the moment.
“For a price you can afford, you won’t get one,” he said.
Holdsworth has plenty of company. Americans are keeping their cars longer than ever. According to S&P Global Mobility, the average age of a car on the road this year reached a record 12.5 years. Sedans like Holdsworth are even older on average – 13.6 years.
This is largely due to the pandemic, which in 2020 led to a global shortage of car computer chips, the vital component that controls everything from the radio to the gas pedal to the transmission. The shortage caused global assembly lines to slow drastically and caused new vehicle shortages to hit dealerships just as consumers were becoming more eager to buy.
Prices reached record highs. And while they’ve come down a bit, the cost of a vehicle still feels extremely high for many Americans, especially when combined with now much higher lending rates.
According to Edmunds.com, since the pandemic began three years ago, the average new car price has risen 24% to nearly $48,000 in April. Typical lending rates for new car purchases have risen to 7% as a result of the Federal Reserve’s aggressive rate hikes to fight inflation.
It has all pushed the nationwide average monthly car loan payment to $729 — prohibitively high for many. Experts say that a family earning the average US household income can no longer afford the average new car payment and still pay for basic necessities like housing, food and utilities.
On average, used car prices have risen even more since the pandemic began — by 40% to nearly $29,000. Since the average loan interest rate has reached 11%, the typical monthly rate for used cars is now $563.
Before deciding whether to pay a hefty sum or keep their existing vehicles, more and more owners are choosing to stick with what they have, even if it means spending more on repairs and maintenance.
Auto mechanics are amazed at the increasing age and mileage of the vehicles, which are now arriving at the workshop in unprecedented numbers.
“Here you see cars with 250,000, 300,000 miles all the time,” said Jay Nuber, owner of Japanese Auto Professional Service, a repair shop near downtown Ann Arbor, Michigan. “They didn’t really have a big job or anything. They just did the (routine) service.”
That doesn’t mean that most older vehicle owners will inevitably face constant repair bills. One reason people are able to keep their vehicles longer is because automobile manufacturing has improved over time. Engines run longer. Bodies don’t rust as easily. components last longer.
But the cost of buying a new or used car is leaving more and more people with no choice but to keep the car they have.
“The equation between repair and purchase has changed,” said Todd Campau, an associate director at S&P. Even with rising repair costs, according to Campau, it is usually still cheaper to repair an older vehicle than to buy it immediately.
The average vehicle age, which has increased slightly since 2019, has accelerated by a significant three months this year. And while the average is 12.5 years, Campau says, more vehicles are 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 significantly older car than in the past. Nearly 122 million vehicles on the road are more than a dozen years old, Campau said. S&P forecasts that the number of older vehicles will continue to increase until at least 2028.
Even though more durable vehicles have longer lifespans, all of this has fueled a boom in auto repair shops. For most of the past year, Nuber’s Japanese Auto has been swamped with customers. It took up to three weeks to get an appointment, whether for repairs or the routine maintenance that is required, especially on older vehicles.
“The phone just kept ringing and the cars just kept coming,” Nuber said.
Now the point has come where some vehicle owners must decide whether they want to pay for a repair that costs more than their vehicle is worth. “This is where a lot of them draw the line,” said Dave Weber, manager at Japanese Auto.
On Friday, according to Weber, a customer needed repairs to the rear brakes, wheel bearings and the exhaust system. The customer decided to only do half of the repairs and decide later whether to put more money into the aging vehicle.
“You fix them and drive them as long as you like until the next major repair,” Weber said.
S&P forecasts new car sales in the US will reach 14.5 million this year, up from about 13.8 million last year. An important reason is that the offer at the dealers is finally growing. Automakers have also begun to reintroduce some discounts that have long helped keep prices under control. The result is that many people who can afford it can now buy something. It’s a trend that could slow the aging of the US fleet and increase overall sales.
Still, no one is expecting a return to pre-pandemic annual sales anytime soon. Even with rebates, new car prices are likely to remain well above pre-pandemic levels for years to come.
Holdsworth, the Chevy Cruze owner, plans to keep his car’s scheduled maintenance, particularly routine oil changes. Even if it came to a major repair, he thinks he’d probably pay for it.
Having bought his vehicle two years ago, Holdsworth has about two years of balance credit left. This means that his Cruze could also reach the national average for 12.5-year-olds.
“I’ll pay it off,” he said, “and drive it for a few more years.”
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