Americans Holding onto Their Cars Longer Amid Sky-High Prices and Rising Interest Rates
Sky-high prices and rising interest rates have led to an increasing number of Americans holding onto their cars longer. This trend is likely to continue as the economy stagnates and prices for new and used cars continue to rise.
As of 2023, the average age of a car on the road is 12 years, which is up from 8 years in 2010. This means that Americans are holding onto their vehicles for an additional 4 years. While buying a new car may seem like the logical choice when faced with car trouble, many Americans simply can’t afford to do so due to the high cost of new cars. According to research, the average cost of a new car in the United States is now over $40,000, which is a significant amount for the average American household.
However, the cost of used cars isn’t any better either. Due to the shortage of new cars, the price of used cars has also risen dramatically. It is not uncommon for a used car to sell for almost the same price as a new car, thereby undermining the affordability of a used car. Furthermore, due to supply chain issues, the prices of used cars are not likely to come down anytime soon, which means that Americans may be holding onto their cars for longer than they had planned.
Another factor that’s contributing to the phenomenon is the high-interest rates on car loans. This is particularly true for those with lower credit scores who end up paying more in interest rates. In an effort to keep monthly payments low, many people opt for longer-term car loans, often for 6 or 7 years. However, this means they will be paying more in interest over the life of the loan, and therefore holding onto their car longer.
Moreover, the pandemic has also contributed to the trend, as people have been more likely to hold onto their cars to avoid public transportation. With the pandemic still ongoing, the trend is expected to continue.
The trend has both good and bad effects. Holding onto a car for longer can save an owner money in the long run, as they avoid the depreciation that comes with buying a new car. However, it also means that older cars are on the road for longer periods of time, which could lead to environmental concerns as older cars are typically less efficient and produce more emissions.
Overall, the trend of holding onto cars for longer periods of time is not likely to change anytime soon. The high cost of new cars, elevated prices of used cars, high-interest rates on car loans, and the ongoing pandemic all contribute to this trend. While there are both positive and negative effects, it is important to consider the impact on the environment and to work towards more efficient and environmentally friendly transportation options.