A new study released by R.L. Polk this week says that consumers are holding onto their cars far longer than just a year ago. On average, say Polk researchers, consumers are keeping a new vehicle just over five years (63.9 months), which is up 4.5 months from this time last year.
Hmm… that means you just get the family buggy paid for (if it’s a 60-month loan) and then you shop for new? Or, if you were lucky enough to get it paid off in 48 or 36 months, then you had one or two years of payment-free driving before you decide to get back into hock?
Let’s talk about the reality of today’s economic climate. It just makes sense to get as many miles out of your family vehicle as possible, it seems to me. Why wouldn’t consumers want to hold onto their wheels – as long as they maintain them properly and they’re not a hazard on the road. Sure, we’d all love to have a brand-new vehicle every two years. Perhaps a few years ago many of us even did that, especially if we were leasing. But today? Not likely – at least for the majority of U.S. car buyers.
Another trade-off for many families has to be the cost of gasoline. Do you hold onto a car that’s less fuel-efficient than newer models, saving on the purchase price of a new one? If you have a multi-car household, the cost of gas and upkeep for all those vehicles adds up. Ditto the cost of insurance.
Consider again the increase in length of time holding onto a vehicle (4.5 months) this year versus the same time last year. The job situation certainly hasn’t improved. If consumers still have a job, they’re not about to jeopardize it by plunking down money for a new car – unless it’s absolutely necessary. If they’re out of work, they can’t get a loan. Times need to get better for many consumers to even think of replacing the family car with a new one.
One bright spot is that several automakers have held the line on prices, with 2011 models coming in at the same or less manufacturer’s suggested retail price (MSRP) as the 2010 counterpart. The 2011 Ford Fusion ($19,695), base 2011 Jeep Liberty ($23,250), and all-new 2011 Kia Optima ($17,995) are just three examples. The all-new 2011 Volkswagen Jetta, with a starting MSRP of $15,995, is actually less than the 2010 model’s base MSRP.
So, what will it take for consumers to turn in (or sell) their nearly five-year-old family cars and buy new again? Seems to me that it’s all about dollars and sense.