Buffalo, N.Y. (WBEN) - Cars are only getting more and more expensive. As a way to prevent themselves from getting in debt or in a difficult financial situation, more and more people are holding on to the cars they have now and trying to utilize them as much as they can before their repairs cost more than the car itself.
According to S&P Global Mobility, the average age of a passenger vehicle on the road hit a record 12.5 years this year with sedans on the road today averaging 13.6 years.
"This does not surprise me at all," says The Car Coach, Lauren Fix.
"I think part of the reason that we're seeing people keeping their cars is because you look at the cost of a vehicle, and you think, 'Oh, the average cost of a regular gasoline powered vehicle is almost $50,000.' There are very few cars that are in the low $20,000 range, where there used to be cars that were under 20,000, that no longer exists for a new vehicle. So it causes people to think maybe I'll buy my vehicle off the lease, I'll keep that vehicle while driving. I've done that personally, myself. I think the reason for that is you look at the cost of new cars, your insurance then goes up. And you realize that every three years essentially renting a car may not work for the average American, especially with the cost of everything getting more expensive."
Interest rates are also on the raise, especially following the pandemic. Since the pandemic struck three years ago, the average new vehicle has rocketed 24% to nearly $48,000 as of April, according to Edmunds.com. Typical loan rates on new-car purchases have increased to 7%, a consequence of the Federal Reserve's aggressive streak of interest rate hikes to fight inflation.
"The car market turns real quick," says Johnny Van with Towne Auto Group. "It was all supposed to get back to normal in December. So we told the customers to hold off in [buying until] November, then all of a sudden December came and we don't want to hold off till January. We said hold off until February for the Auto Show. Then March came and all of a sudden and interest rates went up and rebates were taken away. So basically the cars became so expensive, new car-wise to lease and buy that the people have decided to [just] repair theirs."
Used vehicle prices have been raised even more since the pandemic, too. They are up 40%, to nearly $29,000 on average. An average loan rate for used cars have reached 11%, the typical monthly used-vehicle payment is now $563. However, that hasn't stopped people from buying used, as it is significantly less expensive to buy used, or even cheaper, to repair current vehicles.
"We're selling substantially more used vehicles previous to the pandemic. We were at 42 million cars, now over 50 million cars that are changing hands of all price points in the used car market. And what that tells you is people are looking at used cars to save money. Many of these vehicles are far from being used up. I mean, some of them will last a couple 100,000 miles. And all it takes is for maintenance and it saves you money in the long haul," said Fix.
New cars were hard to find during the pandemic, as shortages in technology slowed down or ceased production for some manufacturers. This resulted in dealers not getting a new lineup of vehicles.
"Basically, the used cars were selling more than some of the new cars, but the new cars weren't available," said Van.
"New vehicle sales are going to increase this year. We're getting more inventory. However, we still have a chip shortage that probably won't be resolved to the end of 2023," adds Fix.
"It's hard to believe it's still the case, but a lot of the minerals that go into the batteries that go into some of the components on catalytic converters come from countries that we're not necessarily friends with at this time. So it makes it more difficult to get those parts. They're limiting what they're sending here. And also it limits us from what we can buy there. So because of that you're not going to see auto sales return until things settle down across the world."
New cars are more expensive to repair as well, another thing people need to factor when purchasing a new vehicle.
"The vehicles that are being built today can be repaired. Just remember the more technology in a car, the more expensive it is to repair all those digital screens. When something goes wrong, you may not be able to afford to replace those screens. And that's when salvage yards make a lot of sense. There's plenty of them in the Buffalo area if you can't locate a part to repair your car," says Fix.
