Two things are certain: the average car on the American road is over 12 years, and the price of the average new car is over $45,000. It is a formula for a drop in new car sales, particularly if there is a recession. (These 15 cars hold their value the longest.)
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S&P Mobility says the average age of an American car is 12.5 years. That is up from under 10 years two decades ago. Among theories about why cars are around longer is that they are built better and do not fall apart as quickly as cars made early in the century. There is also the fact that the Great Recession may have made people hang on to cars longer. Each makes sense.
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The average price of a new car sold in America is about $48,000. That puts many cars beyond people’s financial reach, so they keep their old cars longer. This forms a kind of circle. In the meantime, the trend is a temporary profit bonanza for car companies, as higher prices also tend to push margins higher.
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The car companies will enjoy their newfound profits for only a few years, if not a shorter period. As new car prices rise, people will keep their cars even longer. The average age will push toward 15 years. Car companies will find the universe of buyers is shrinking. If interest rates stay high, financing a new car will cost even more. It is a perfect storm against manufacturers.
People Can’t Afford Cars, Keep Old Ones
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Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.
McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.
His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.
A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.
TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.
McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.
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