Money expert Clark Howard has often recommended that you drive your car until the wheels fall off. A new report shows that a lot of us might finally be starting to take his advice.
Research from IHS (Information Handling Services) Markit, a data services company that provides analysis to the financial sector and government, indicates that vehicles on U.S. roads today are older than they’ve ever been.
Clark says this is a testament to the ingenuity of today’s automakers and owner keeping their vehicles in good shape. “Cars just keep getting better and better and better,” he says.
How Old Is the Average Car on American Roads?
“For the first time ever, the average age of a vehicle rose to 12.1 years,” said Clark, citing the report. “Today, because of tremendous improvements in technology and intense competition, the quality is so, so, so much better.”
That mark represents nearly a two-month increase in age from the previous year.
The research highlights several effects of the COVID-19 pandemic’s impact on the rising age of America’s vehicle fleet, including:
- The plummeting of new vehicle sales
- Fewer miles traveled (so less wear and tear on vehicles) as more Americans worked from home
- A sudden increase in vehicle “scrappage,” the measure of cars leaving the active population. According to the report, “Typically, an increase in scrappage rate would be expected to be a headwind to average age, but coupled with the lower new vehicle sales and reduced vehicle miles traveled, the combined impact proved to be a tailwind.”
The report also says that the number of vehicles in operation in the U.S. decreased: 279 million, down from nearly 281 million the year before. That’s the first decrease since 2012.
Will People Continue To Keep Vehicles Longer?
In a word, “No.” Here’s what the report’s news release says you should expect to see happen:
“The pandemic-induced rate of increase in average age is expected to be short-lived as 2021 will see a return of new vehicle registrations and increased activity in used registrations as we adapt to post-pandemic norms.”
The Financial Benefits of Keeping Your Car Longer
When you look at your overall budget, Clark says the importance of reducing the impact of vehicle expenses is actually the primary way you can save money over the long haul.
“The one area of your budget that you can have the greatest impact over your long-term spending is what you’re paying for your wheels. Not just what they cost, but the real damage to your wallet comes from cycling through vehicles,” he says.
Clark says because the overwhelming majority of a car’s depreciation occurs in the first few years, keeping a vehicle for about a decade “is phenomenal for your long-term financial health.”
But for some car shoppers, this may raise an issue: Are a used vehicle’s safety features outdated after 10 years?
Follow Clark’s 4-and-4 Rule
If want to reduce the cost of transportation and still have a vehicle that’s modern enough to keep you safe, Clark says:
“It’s the four-year cycle: Buy a four-year-old vehicle every four years. The economics equate over time to being very similar to buying a new vehicle you keep for 10 or more years.”
Not only will a four-year-old vehicle contain a majority of the modern safety features available today, but Clark says you’ll avoid much of that steep deprecation that occurs in the first few years.
“So follow the four-and-four rule,” Clark says, “Buy four-year-old vehicles that you keep for four years.”
To hear Clark’s full take on this topic, listen to the segment:
Want more money-saving tips? Here’s how to buy a used car.