They Keep Going and Going...

February 22, 2008

It may be good news to consumers, but the fact that better quality cars and trucks last a lot longer is, at best, a mixed blessing for auto manufacturers.

According to a new study by R.L. Polk & Co., the median age of the vehicles on U.S. roads averaged 9.2 years in 2007, tying the figure set the year before. But a whopping 41.3 percent of the vehicles were at least 11 years old, a nearly half-year rise from 2006. The median age for trucks has meanwhile risen to 7.1 years, up slightly from 2006.

That should be little surprise to anyone who has been following the industry, even at a passing glance. Studies by the likes of J.D. Power & Associates show that quality continues to get better and better each year. The best manufacturers on the market typically record less than one “problem” per vehicle during the first three months of ownership. And even the worst brands on the market – at least from a quality perspective – report fewer problems, today, than industry-leading marques did a decade ago. Long-term reliability is also rising, say Power and other experts.

Now add the current economic crisis, which is straining many household budgets and sharply reducing the availability of loans, at least to all but the most affluent buyers. The squeeze is particularly problematic in key car markets, like Florida and California. In urban centers, like Los Angeles and San Francisco, roughly half of all new vehicle buyers relied on home equity loans, rather than traditional auto lenders, during the peak of the last recession – in part because of potential tax deductions. Suddenly, equity lines are difficult to access, which may be a reason why even Toyota, which normally feels little sting from recessions, saw a sharp decline in January sales, particularly in Florida and California.

R.L. Polk analysts note that it is a lot easier for motorists to delay a car purchase when their current vehicle is in good shape.

We can imagine the shudder the new study is generating in places like General Motors' Renaissance Center world headquarters, or Ford Motor Co.'s "Glass House." The industry is, after all, forecasting one of its worst years in a decade or more, with new vehicle sales dropping to perhaps 15 million. But some folks are quite pleased by the aging of the American automotive fleet, notes a story from the Associated Press. Last year, the AP reported, brought as much as a 7 percent jump in sales of extended service contracts, which can offset unexpected repairs in vehicles no longer under warranty.

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