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July 31, 2020 09:33 AM

Average age of U.S. vehicles approaches 12 years

Krystal Hur
Automotive News
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    AUTOMOTIVE NEWS ILLUSTRATION

    With drivers staying home during the coronavirus pandemic, the average age of U.S. light vehicles is expected to accelerate an upward trend.

    IHS Markit said in a report that the average age of vehicles this year rose to 11.9 years, up about a month from an average age of 11.8 years in 2019. The study was based on a snapshot of vehicles in operation on Jan. 1.

    The number of light vehicles in operation in the U.S. exceeded 280 million this year. That's an increase of 2 million, or roughly 1 percent, from last year. The number of vehicles 6 to 11 years old is expected to increase, while the number of vehicles 12 to 15 years old is expected to decrease as a result of lower volumes during the Great Recession.

    IHS Markit began tracking vehicle age in 2002, when the average age was 9.6 years.

    New-vehicle sales already were decreasing before the pandemic, representing 6.1 percent of vehicles in operation in 2019 from the record-setting 6.7 percent in 2016. The report said the coronavirus pandemic will accelerate that trend so that U.S. new-vehicle sales will make up 5 percent or less of all vehicles on the road in 2020.

    Todd Campau, associate director of aftermarket solutions at IHS Markit, told Automotive News that the "X-factor" increasing average vehicle age will be the stay-at-home orders that permeated many states this spring.

    "People are going to keep their vehicles because they don't know if they're going to be driving to work in the future, they don't know if they're going to be driving to work anytime soon even," he said. "If you're not accumulating the miles, you might keep that vehicle on the road a little longer."

    The percentage of vehicles exiting the fleet, or the scrap rate, has risen to 5.1 percent in 2019 from 4.6 percent during the record U.S. sales year of 2016.

    But the lower new-vehicle U.S. sales last year offset the higher scrap rates, resulting in the increased average age of the fleet, IHS Markit said.

    The 2019 rate is comparable to the 2009 rate of 5.2 percent, which helped drive up average vehicle age by four months throughout the year.

    Used vehicles

    The report also said that the "dynamic of the changing vehicle fleet" will increase average age of vehicles by four to six months in coming years. This bodes well for used-car and aftermarket companies, and Campau said he has been "pleasantly surprised" by how they have weathered the pandemic.

    He said large retailers and other industry players told him that during the pandemic, e-commerce orders have increased more than ever. Another key factor was that aftermarket shops stayed open during stay-at-home orders while dealerships closed, he said. But the decrease in vehicle miles traveled could delay maintenance services, he said.

    The report also mentioned regional differences in average vehicle age. Campau said that in the northeast region, the average age was below the national average and has the potential to grow significantly. That's because areas such as New York and New Jersey have been hit hard by the pandemic, resulting in prolonged stay-at-home orders and sharp increases in unemployment, he said.

    Campau said that this means that aftermarket stores should target maintenance jobs more and shift practices to accommodate "a shifting product mix."

    "People are keeping vehicles longer overall, but the older vehicles could be on a third or fourth or fifth owner," he said. "The way you market and the product you try to sell to that third or fourth or fifth owner, as the individual value of the vehicle declines, is not the same as what you try to sell to a first or second owner."

    Campau said the pandemic has resulted in "unprecedented times," even relative to the Great Recession.

    "I don't think we're going to see things like cash-for-clunkers this time around," he said. "We do see the potential for a pretty significant average age growth in the coming years."

    He added, "I would not be surprised if we see a jump in the four- to six-month range as opposed to just a one- to two-month range."

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