reached a record 12.1 years. Cars are getting faster, safer,

more tech heavy, and the average age of a vehicle in the US is

rising.

It has been increasing for really ever since we've been

recording it.

Two big reasons for this say industry analysts cars have been

growing more durable and more expensive. Drivers are holding

on to their cars longer and cars are spending more time in the

used vehicle market before they head to the junkyard.

I have a 1993 80-series Land Cruiser that I bought brand new

28 years ago and it has 215,000 miles on it and the engines

never been apart. I have serviced the vehicle regularly

and faithfully

Many buyers especially those with less money to spend are

seeking out used vehicles as new vehicle prices climb.

There is some concern that this is going to reduce the churn

rate or the number of folks that are going to be buying a new

vehicle.

So far though, plenty of Americans seem to be buying new

cars. New vehicle sales reached a record high of 17.5 million in

2016. And the number of vehicles per household has gradually

increased over time even as vehicle age has risen. But every

driver that chooses to hold on to a car for another year is

postponing a trip to the dealership and some industry

analysts wonder if rising vehicle ages and prices indicate

trouble for new car sales in the future. Automakers are stuffing

cars with new technology and improvements, but will that be

enough to keep buyers wanting the latest and greatest.

In the 1970s, a car would be expected to last at most 100,000

miles. At that time vehicles had five digit odometers so the

typical odometer only went up to 99,999 miles. But now it is

typical for cars to last well over 100,000 miles and many will

make it to 200,000 or more. 25% of the cars on the road in the

US are at least 16 years old. There are some cars that last an

especially long time iSeeCars a search engine for car shoppers

publishes a list of the longest lasting vehicles and brands on

the road. In order to make the list at least 2.5% of the cars

with a certain nameplate have to make it to the 200,000 mile mark

about 1% of the average vehicle model well make it past 200,000

miles. But some models are disproportionately represented

among higher mileage vehicles, SUVs and trucks from Toyota,

Honda, and General Motors. The Toyota Land Cruiser a favorite

vehicle of offroaders United Nations forces and wealthy SUV

buyers tops the list. More than 16% of Land Cruisers on the road

have at least 200,000 miles on the odometer. It is followed by

another large Toyota SUV, the Sequoia.

Then when you go to the third vehicle, which is the Chevrolet

Suburban, you're now at 5%. So the first vehicle on the list

has three times the percentage of models with 200,000 plus

miles versus the third vehicle on the list showing how A)

quickly it drops from the first few vehicles on the list and B)

how truly unique and capable and durable the Toyota LandCruiser

is. It really stands out even among this group.

Toyota especially has a reputation for making cars that

last a very, very long time.

We have 100 vehicles on display right now in the building and

quite a few of them have an awful lot of miles on them, over

200,000 miles 300,000 miles. We have one Japanese market Land

Cruiser Prado that was a highway service vehicle and it has over

420,000 miles on it with the original engine in the frame and

it runs beautifully.

One Toyota owner's full size Tundra pickup lasted for more

than a million miles for example, the automaker bought

the truck back and gave the owner a new one.

It's pretty clear that Toyotas have not just a reputation for

durability, but a proven track record of durability just just

by glancing at this list. Typically the cars on this list

especially at the top of the list are body on frame cars you

see a lot of body on frame vehicles here and you see a lot

of Toyotas. Of course the Land Cruiser is both it's a body on

frame Toyota, and the next vehicle on the list the Toyota

Sequoia is a body on frame Toyota.

Consumer Reports also publishes a list of 10 cars it says are

most likely to make it to the 200,000 mile mark and it is

populated entirely with Toyotas and Hondas. It is important to

note that just because a car is not on the iSeeCars list doesn't

mean it is not reliable. Porsche for example, has a strong

reputation for reliability, but might not make it onto a list

like this because Porsche owners often drive their cars

conservatively to keep mileage low. In addition to being more

durable cars are also becoming more expensive. In December

2020, the average price of a new vehicle in America reached a

record $38,000. Average new vehicle prices have been

bouncing around the mid $30,000 range for several years. As this

has happened, automakers have also appeared to trim their

portfolios of lower priced vehicles. In 2013, sales of cars

costing less than $20,000 made up 20.1% of total annual new car

sales. By 2020, that figure was 9.4%. Customers who are priced

out of buying new cars are likely to turn more and more to

use vehicles. But many owners are simply foregoing car

purchases altogether preferring to hold on to their cars for

another year or two.

Part of what makes it easier to hold on to vehicles longer is

the availability of parts of the internet even for obscure or old

cars. There are opportunities for shops even dealers to

provide services to cost conscious car owners looking to

delay the purchase of a new vehicle.

Fix operations of repair and servicing of vehicles is gonna

be an important part of dealers operations, and probably a

growing more important part of dealer operations. Because all

of these vehicles are going to need repairs. If you're going to

have a vehicle for 10 years or longer, you're probably going to

be visiting your car dealer more and more to try and repair all

the little issues that may pop up on that vehicle.

Outside of the vintage or classic car markets, consumers

might not be used to thinking of their cars as investments after

all cars are typically depreciating assets. But the

sheer cost of buying a new vehicle might make it more

appealing for consumers to put money into the cars they already

own. Even making major changes like swapping in a new engine.

So these trends could mean less demand for the new cars that

roll off assembly lines every year. So far, demand for new

vehicles hasn't waned, despite the rising age.

You think average age would lower the number of

opportunities for sales. But it doesn't seem to have done that.

It's been good news across the board for new vehicle dealers

used dealers and the service channel as well.

And there are reasons to think plenty of buyers will still want

the latest and greatest in new technology and features.

Lots of folks out there don't want to own a vehicle for 10

years, they want to keep a new vehicle around, they don't like

getting over a certain amount of mileage. And so those folks come

back to the market every three, five years, much more

frequently.

Automakers have a number of levers they can pull to induce a

customer to swap out their current vehicle for a new one.

New safety systems, better fuel economy, infotainment features,

cameras, and sensors can all entice buyers

Just like the iPhone 10 has to be substantially better than the

iPhone 9 for anybody to want to shell out another $1,000 to get

the latest and greatest much is the same in the new vehicle

market as well as in the used vehicle market. But that new

vehicle has to be substantially different than its used

counterpart, because folks are able to buy that use vehicle for

a substantial savings off the new vehicle price.

Automakers have always freshened their products from year to

year, but the pace at which they're doing so seems to be

accelerating.

The industry is finding that there's a lot of technology to

add on these vehicles. So the pace of of new components, new

capabilities, is constantly improving as well. And all of

that makes the vehicle market a much more rapidly changing

industry than it was just a few years ago.

There are a few short term reasons to think Americans might

hold on to their vehicles a bit longer.

The way people interact with their cars may be changing.

People staying at home more often for work than they have in

the past may actually cause people to consider if they need

that additional vehicle or if maybe we might actually see a

catalysts on the horizon for that approach to maybe reverse a

little bit where people decide they don't need quite as many

vehicles or maybe they want different vehicles for more

recreational purposes.

New vehicle sales hit a historic high of 17.5 million units in

2016. Since then they have been falling. Vehicle sales in 2020

were an especially low 14 million due to lock downs,

production stops, and shortages of critical supplies such as

microchips. That means there is a smaller supply of both new and

new-ish used vehicles coming into the market, including

expired leases, or cars tossed from rental fleets. But there is

another change coming, the rise of the electric vehicle.

Technology is changing so quickly that an EV made one year

might be pretty obsolete in a very short time. Consider how

much electric vehicle ranges have risen in the last several

years.

There's products out there right now that only have a range of

150 miles. Future products are suggesting they're going to have

ranges above 400 miles.

The upside is that it might bring more customers into the

market more frequently. The challenge is figuring out what

the residual values of EVs will be. It also might make customers

skittish to buy an electric vehicle in the first place.

If you bought an iPhone 5 Are you willing to sit with that

iPhone for 10 years till the iPhone 15 comes out. God knows

all of the capabilities that you'd be missing out on from

sticking to this technology at an early stage. Well, that's

what we're asking electric vehicle buyers to do. The

technology is still moving very quickly.

Nearly every major automaker is pursuing an EV strategy. But the

very rapid change and the pace of technological development

poses questions of vehicle value for dealers, banks, and

customers.

What is the value of a vehicle that gets half the range of a

new product that's coming out. And I think this is one of the

issues that the industry is struggling with. These retention

values are an important part of the industry, especially for the

financing side. Because the lending companies can't really

lease to a vehicle if they don't know what the residual values

are. Lenders may be reluctant to loan money to you if you're

going to buy a vehicle if they don't know what these values

are. So all of that can be very disruptive to the purchasing

side of the industry. And yet, with so much volatility in the

technology and development that's going on a daily basis,

it's going to be a moving target to try and estimate what these

retention values really are.

One solution for this says Chesbrough is vehicle

subscriptions, an idea that has been delved into a bit but not

yet fully explored. Subscription plans vary, but overall are

similar to leases with some important differences. They are

often more inclusive of the total cost of ownership. For

example, many subscription plans come with registration,

insurance, and maintenance costs bundled into the fee, so owners

don't have to account for those separately. Subscription plans

also allow customers to swap out one vehicle for another, for

example, a newer or different model as the customer's needs

change. Plans like these might allow buyers to sample new

vehicles such as electric cars without worrying that their

investment might be a bad one. And it might enable a car with

rapidly obsolescing technology to stay on the road a bit

longer. The European Union has said it plans to start phasing

out the sale of new internal combustion vehicles by 2035. New

York and California have recently set similar targets.

Higher fuel prices or fees such as a gas guzzler tax on

especially thirsty vehicles may turn consumers away from gas

cars shortening their usable lives.

The Covid 19 pandemic has changed what kinds of cars

people are buying. Sales of RVs and vehicles such as ATVs, and