Ann Arbor, Mich. (AP) — With new and used cars still painfully expensive, Ryan Holdsworth says he plans to keep his 9-year-old Chevy Cruze for at least four more years. Reducing his car payments and overall debt is a bigger priority for him than owning a new car.
A 35-year-old grocery store attendant from Grand Rapids, Michigan, Holdsworth would probably be in the market for a car in a few years—if not for the high cost. At the moment, this is out of the question.
“You’re not going to get one at a price you can afford,” he said.
Holdsworth owns a lot of companies. Americans have been keeping their cars longer than ever before. The average passenger vehicle’s lifespan on the road hit a record 12.5 years this year, according to data compiled by S&P Global Mobility. Sedans like Holdsworth are older, on average – 13.6 years.
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Blame it mainly on the pandemic, which in 2020 caused a global shortage of automotive computer chips, the vital component that runs everything from radios to accelerator pedals to transmissions. Shortages drastically slowed global assembly lines, making new cars scarce at dealership lots just when consumers were increasingly eager to buy.
Prices have reached record levels. And while it’s been mitigated somewhat, the cost of a car still seems prohibitively expensive to many Americans, especially when combined with much higher loan rates now.
Since the pandemic hit three years ago, the average new car has increased 24% to nearly $48,000 as of April, according to Edmunds.com. Typical loan rates on new auto purchases have ballooned to 7%, as a result of the Federal Reserve’s aggressive series of interest rate increases to fight inflation.
All of this has pushed the national average monthly car loan payment down to $729—too high for many. Experts say a household earning the median household income in the United States can no longer afford the average new car payment and still cover necessities like housing, food, and utilities.
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Used car prices have risen, on average, further since the pandemic hit — up 40%, to nearly $29,000. With the average loan rate at 11%, the typical monthly payment for a used car is now $563.
Faced with a decision between making a huge payment and keeping their current vehicles, more owners are choosing to stick with what they have, even if it means spending more on repairs and maintenance.
Auto mechanics have been shocked by the rise in ages and miles arriving at the shop in numbers never before seen.
“You see cars all the time here at 250,000, 300,000 miles,” said Jay Knober, owner of Japan Auto Professional Service, a repair garage near downtown Ann Arbor, Michigan. “They didn’t really have a big business or anything. They just did the (routine) service.”
This is not to say that most owners of older vehicles are necessarily stuck with fixed repair bills. One of the reasons people are able to keep their cars for increasingly long periods of time is because car manufacturing has improved over time.
Engines run longer. Bodies do not rust quickly. Ingredients last longer.
However, the cost of buying a new or used car leaves more people with no choice but to keep the cars they have.
“The fix-versus-buy equation has changed,” said Todd Campau, associate principal at S&P. Even with repair costs soaring, Campau said, it’s still more cost-effective to repair an older vehicle than to go shopping.
Average vehicle age, which has been up since 2019, accelerated this year by a big three months.
Campau noted that while 12.5 years is the average, more vehicles stay on the road for 20 years or more, sometimes with three or four consecutive owners.
In such cases, the third or fourth owner will get a vehicle that is much older than they would have in the past. Campau said nearly 122 million vehicles on the road are more than 12 years old. S&P predicts that the number of vintage cars will continue to grow through at least 2028.
Even with more durable vehicles able to last longer, all of this has created a boom time for auto shops. For much of the past year, Nuber’s Japanese Auto has been overwhelmed with customers. It took up to three weeks to get an appointment, both for repairs and routine maintenance that older vehicles in particular required.
“The phone kept ringing, and the cars kept coming,” Nober said.
Now is the time when some vehicle owners have to decide whether to pay for a repair that costs more than the value of their vehicle. This is where a lot of them draw the line, said Dave Weber, principal at Japan Auto.
On Friday, Weber said a customer needed rear brakes, wheel bearings and exhaust system repairs. The customer decided to only do half of the repairs and wait until later to decide whether to sink more money into the old car.
“They fix them up and drive them for a long time, until the next major overhaul,” Weber said. S&P expects new U.S. vehicle sales to reach 14.5 million this year, from about 13.9 million last year. A big reason is that supply at dealerships is finally growing. Automakers have also begun to restore some of the discounts that have long helped curb prices. The result is that many people who can afford to buy can now do so. It’s a trend that could slow the aging of the US fleet and boost overall sales.
However, no one expects pre-pandemic annual sales to return by around 17 million anytime soon. Even with the discounts, new car prices will likely remain well above pre-pandemic levels for years to come.
As for Holdsworth, owner of the Chevy Cruze, he plans to keep up with his car’s scheduled maintenance, especially routine oil changes. Even if he’s faced with a major overhaul, he thinks he’ll probably pay for it.
Having bought his car two years ago, Holdsworth has about two years of payments remaining. So Cruz might also hit the national average at 12.5 years old.
He said, “I’ll finish paying it off, and drive it for another two years.”
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