Bloomberg, citing new data from analytics firm IHS Markit, said the age of cars and light trucks increased by .20 years from 11.9 years in January 2020 to January 2021.
“There doesn’t seem to be a loser here. New vehicles win. The aftermarket wins,” said Todd Campau, IHS Markit’s associate director of aftermarket solutions. “The older the vehicles are, the more opportunity there is that they are reaching the end of life, which feeds new vehicle buying.”
A global semiconductor shortage could be the reason why people are keeping their cars and trucks longer as the availability of new supply dries up, forcing used car prices to jump in May. Used car prices are now up 16.6% year-to-date (ytd) and according to the Mannheim Used Car Index, which is up 26% YTD and 48% Y/Y, it’s set to keep rising.
Whatever the reason, maybe because the typical term length for auto loans is 63 months, with some loans even out 72 to 84 months, people are holding on to their vehicles for a record length.
Even before the Covid-19 pandemic, vehicle owners took out longer loans and leases to offset rising new-car costs, prompting them to hold on to the vehicles longer, Campau said. Record sales before the pandemic also led to a wave of cars that have fallen out of warranty. – Bloomberg
Campau said these vehicles are in the “sweet spot” for repairs and overhauls because of wear and tear.
“There’s money to be made across the board, but I would probably say the aftermarket stands to gain the most from the used vehicle fleet,” he said.
And unfortunately, while nominal wage growth – a critical component to keeping inflation sticky – continues to rise, when indexed for inflation, real average hourly earnings are the lowest they have been this century!
So as the cost of everything goes up, even vehicle repairs, this is more bad news for the average American driving an older car that will eventually need repairs – unless they buy the part themselves and learn how to install it via a YouTube video.
Sun, 06/20/2021 – 17:00
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Author: Tyler Durden