Americans seem to be holding onto their cars for longer periods of time. Research from IHS Markit shows that the average age of “light vehicles” in operation in the U.S. has risen to 11.9 years.
That’s a dramatic increase, considering that in 2002, the U.S. Department of Energy reported the length of time owners kept their cars was just three years. Today, 25 percent of cars in the U.S. are at least 16 years old, as vehicle age hits a record high.
The London-based data provider found that prices for selling vehicles to scrap metal shops have increased. Typically, that would cause the average age to drop, but new vehicle sales are flat.
As a result, having fewer new vehicles added to the U.S. vehicle population has offset the potential drop in average age.
Underlying weakness in several segments of the market, combined with higher car prices, put pressure on the average age of vehicles, as consumers opted for longer-term financing options or are holding onto their vehicles for a longer period of time.
New vehicle sales provide the pipeline for young vehicles coming into the marketplace. Researchers say the reduced number of new vehicles in the country means there are fewer younger vehicles to temper average age growth.
Even before the COVID-19 brought the economy to a halt, U.S. car sales were already trending downward, representing just 6 percent of vehicles on the road last year, compared to nearly 7 percent in 2016, the last record-setting sales year.
According to the IHS Markit forecasts, new vehicle sales in 2020 are expected to account for 5 percent or less of all vehicles on the road in the U.S., the result of further slowdown from COVID-19.
Scrap metal is seen as the measure of existing vehicles, IHS said. In 2009, when new vehicles sold represented 4.2 percent of the cars on the road, scrappage stood at 5.2 percent, resulting in a rapid increase in average age, which increased by four months that year.
In April, PYMNTS reported that auto purchasing moved to the web as dealerships experienced low traffic and many showrooms shuttered.