2023-05-18 21:31:45
Two things are certain if this happens: The average car on American roads is more than 12 years old, and the price of the average new car is over $45,000.
This is a formula for a drop in new car sales, particularly if there is a recession. And this recession in the industry is surpassing the European one, which is calculated in 10 years the useful use of a new car.
S&P Mobility says that the average age of an American car is 12.5 years.
That’s more than less than 10 years two decades ago. One of the theories as to why cars last longer is that they are built better and don’t fall apart as quickly as cars made at the turn of the century. But the truth is not so.
There’s the fact that a Great Recession may have made people hold on to cars longer. Each one makes sense.
The average price of a new car sold in the United States is about $48,000, which is crazy compared to 10 years ago.
That puts many cars out of people’s financial reach, so they keep their old cars longer.
This collapse of the industry forms a kind of circle
Manufacturers don’t care, as they make less but earn more, setting much higher prices.
This trend is a temporary profit bonanza for auto companies, as higher prices also increase margins, but at what cost?
Car companies will enjoy their new profits for a few years, if not shorter. As new car prices rise, people will keep their cars longer. The average age of a vehicle will be pushed towards 15 years.
Automotive companies will find that the universe of buyers is shrinking. If interest rates stay high, financing a new car will cost even more.
It’s a perfect storm against manufacturers, who won’t be overwhelmed by overloaded orders, and who will take advantage of prices at the expense of the consumer.
Some 20 years ago, an immigrant could arrive, work for a year, settle in, and get the new car of their dreams. At 5 years old he can compare his house. That already happened, the United States stopped being a cheap country, to be expensive with new cars that are no longer available to everyone.
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