Americans In No Hurry To Retire Clunkers, As Sales Falter

March 11, 2011
It's the cycle of life. As we buy new vehicles, we trade others in; frugal used-car owners buy those, and sell their older vehicles. And in turn, a tired heap of a vehicle is retired.

Trouble is, we're not retiring as many vehicles as we used to.

The average vehicle in the U.S. is now about ten years old (9.9 actually), and probably, if it's the typical vehicle, nowhere near retirement age. Back in 1990, the median age of U.S. vehicles was just 6.5 years, and in pre-recession 2007 it was still around nine years.

The good news for the industry is that, as of late, a few more vehicles are being brought to the junkyard, and it appears Americans have given up trying to repair some of their most worn-out beaters. According to Experian Automotive, vehicle scrappage significantly increased in the fourth quarter of 2010 compared to the quarter before, when Cash for Clunkers had driven many clunkers to an early retirement.

The bad news is that looking at these vehicle retirements over a slightly wider timeframe, we're still not making much room for a significant spike in new-vehicle sales. Yes, we've seen some encouraging results over the past several months, but auto sales are still deeply depressed.

Over the last half of 2010, about 5.7 million new vehicles were sold, while roughly the same amount were scrapped, so the number of currently registered vehicles in the U.S. has remained relatively stable, at about 240 million cars and light trucks (the U.S. is a mature market, so that total isn't going to change significantly). Of those that stayed in circulation, about 17.5 million used vehicles changed owners during that time.

In 2010, 5.3 percent of cars and 3.5 percent of trucks were retired from duty. That's also a fraction of what we were scrapping in strong economic times. Experian also points out that total vehicles from the 1983 to 1992 model years saw a decrease of more than eight percent just in the last half of 2010. The early 1990s were a period when most automakers made huge improvements in vehicle reliability and longevity.

As we've reported, the best we can hope for in 2011 is a modest sales recovery, perhaps reaching the 13-million mark this year.

In some respects, it's a chicken-or-the-egg issue. Which comes first, the urge to get a new vehicle or the need to get rid of the old clunker? Are you ready to retire a vehicle and replace it with a new one, or keep holding on?

[Experian Automotive]

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