By Alexandra Svokos
in News
Americans are driving even older cars than ever before, as prices for new cars remain prohibitively high for many. This year, the average age of cars in the U.S. is 12.6 years, according to a recent report from S&P Global Mobility.
This marks an increase of two months from last year’s average, which also set a record for older vehicles on the road. However, as reported by S&P Global Mobility, the rate at which cars are aging is slowing, a trend that correlates with rising car prices.
The Impact of Rising Car Prices
Prices of new cars saw a significant jump between 2021 and 2022 due to severe supply disruptions caused by the pandemic. Consequently, even when factoring in inflation, car prices surged dramatically. Since mid-2022, while new car prices have begun to stabilize as supply chains recover, they still remain high.
As Todd Campau, aftermarket leader for S&P Global Mobility, pointed out, “Prices are prohibitively high for a lot of households now.” This situation has led many individuals to hold onto their vehicles instead of trading them in for new models.
The average price of a new vehicle reached $48,510 in April, which is 0.5% lower than the previous year. However, this figure reflects a slight increase following a brief period of declining prices, alongside diminished discounts offered by manufacturers.
Positive Signs for Potential Car Buyers
Even amidst the trend of aging cars, there are indications that new car prices may become more accessible. As the auto supply continues to recover from pandemic-related disruptions, new car prices are expected to stabilize further. Erin Keating, an executive analyst at Cox Automotive, noted that discounts on vehicles are likely to gradually increase throughout the remainder of 2024, which may help sustain sales momentum.
Moreover, the latest consumer price index report indicates a 1.4% decline in used car and truck prices, showcasing deflationary pressures in the automotive market. Meanwhile, prices for new vehicles saw a slight drop of 0.4%. Additionally, older cars are losing value more slowly than before, with new cars retaining approximately 10% more of their value after three years compared to 2019.
Other Factors Impacting Car Affordability
It’s important to remember that owning a vehicle involves more expenses beyond the purchase price. Drivers are currently faced with challenges stemming from various cost increases.
For instance, gas prices are projected to rise as summer approaches. The current national average for regular gas stands at $3.615, an increase compared to $3.543 in 2023. Furthermore, auto insurance premiums are also on the rise. Vehicles equipped with advanced safety systems may incur higher insurance rates due to the cost of replacing these systems following an accident.
On the positive side, consumers interested in electric vehicles may benefit from federal tax credits. Additionally, holding onto a car longer—especially if not driven frequently—can sometimes be environmentally advantageous.
