Polk in the News: Americans are keeping new vehicles an average of nearly six years, 02/22/2012
Source: Detroit Free Press, Alisa Priddle
New data showing Americans are keeping vehicles longer than ever raises questions about whether a new frugality will prevent the market from returning to its 17 million-a-year annual peak during the last decade's housing boom.
The depth of the downturn and slow recovery is reflected in a report released Tuesday by the Southfield-based research firm R.L. Polk showing the age of cars is at record levels in the U.S.
Car sales continue to improve, but better-quality vehicles bought with longer financing terms and economic uncertainty are keeping consumers cautious.
Some economists say the aging trend has peaked, but won't reverse for another a year or two.
The good news: pent-up demand continues to build.
"Unemployment rates continue to be high," said Polk aftermarket leader Mark Seng.
Polk collected data in the third quarter of 2011 showing that consumers who bought their vehicles new kept them an average of 71.4 months, or nearly six years. That is the longest in the eight years Polk has done the survey, and up from about four years of ownership in 2003.
Will new frugality hold new car sales down?
U.S. Auto Supply, a 30-year-old parts and salvage shop on West Warren in Detroit, has never been busier because Americans are keeping new vehicles an average of nearly six years.
"Sounds about right," service manager Manuel Carrillo said Tuesday when told new data had been released showing Americans are keeping new and used vehicles longer than ever.
Southfield-based R.L. Polk released a study Tuesday showing that better quality and economic uncertainty are major reasons consumers are keeping their wheels longer.
Polk data collected in the third quarter of 2011 shows new vehicle owners kept them an average of 71.4 months, or nearly six years. That is the longest in the eight years Polk has tracked this statistic, and nearly two years longer than the average life of ownership in 2003.
The trend was similar for used cars and trucks, which consumers kept a record average of 49.9 months, up from 32.2 months in 2003.
Behind the statistics are people like Eric Rabior, who has put 150,000 miles on his 2002 Dodge Dakota and boasts: "It's a lot cheaper to fix than an import, too. No car payment for years."
Or Jason VanDerwerken, who shoots down the better-quality theory in favor of an economic one. "People are keeping cars longer because new cars are so ridiculously overpriced," he said in comments to the Free Press story on Facebook, arguing the results reflect the fact that "the economy is terrible and people are penny-pinching and spending smarter."
Whatever the reason, the average age of vehicles on U.S. roads is at a record 10.8 years, according to a separate Polk report released last month.
This pent-up demand should help sustain the industry's recovery that saw Americans buy 12.8 million new vehicles in 2011, up from 11.6 million in 2010.
Most automakers and forecasters are expecting industry sales to range between 13.7 million and 14.5 million this year.
Even still, it could take a year or two before the average age of vehicles comes down.
"We know people are buying because sales have risen nearly 10% last year and we expect that again this year," said Paul Taylor, chief economist for the National Automobile Dealers Association. "Cars will slow considerably in the aging process as sales pick up."
Taylor expects the average age of vehicles will stabilize this year or in 2013.
Much depends on the underlying factors behind consumers' decisions to hang onto their vehicles longer.
Polk cited continued conservative spending in a still-weak job market with relatively high unemployment rates. Many buyers have taken out longer loans, sometimes as long as six years, to buy a vehicle.
Taylor and Ford's sales analyst Erich Merkle say the recent economic downturn was deeper than earlier recessions. The subsequent recovery has been more protracted. Higher used car prices are pushing more people to buy new. People who have kept their jobs or found new ones are starting to feel more secure, Merkle said.
"People don't want to hold onto their vehicles longer. It's because they had to," Merkle said.
In the interim, all those aging vehicles represent dollar signs for those who make and sell replacement parts. Places like U.S. Auto Supply.
"People say they are worried about their jobs and would rather repair a car than have a car note," Carrillo said.
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