Polk: Scrappage Rate, Average Vehicle Age Climb
SOUTHFIELD, Mich. — In a recent 15-month period examined by R.L. Polk & Co. analysts found that there were significantly more vehicles scrapped than added to the roads.
The Cash for Clunkers program — which occurred during the period of Polk's study — accounted for "thousands" of the scrapped units, officials said.
More specifically, Polk found during its analysis of the period between July 1, 2008, and Sept. 30, 2009, that there were more than 14.8 million vehicles scrapped in the U.S., compared with a little more than 13.6 million new-vehicle registrations during the same time frame.
The resulting scrap rate is 6.1 percent, compared with 5.7 percent 15 months prior, and 5.2 percent as of July 1, 2007.
"This includes thousands of units scrapped during last year's CARS program, known as Cash for Clunkers, and follows a trend seen by Polk over the past five years," officials indicated.
However, while Polk found that more vehicles were scrapped in part due to CARS, the same program didn't appear to impact the average age of vehicles on the road by much.
Polk discovered that the average age of vehicles has seen a substantial increase.
Vehicles in the U.S., on average, were 10.2 years old during the period of Polk's study, compared to an average age of 10 years old just 15 months before.
Moreover, this marks a 21-percent upswing compared to its level just over 14 years ago (as of July 1, 1995), when vehicles were, on average, just 8.4 years old.
Perhaps not surprisingly, helping to push up the average age has been the trend of drivers holding on to their rides longer, Polk noted.
For example, U.S. consumers' average ownership period was 49.9 months as of September. A year before that, the ownership period averaged 45 months.
Economic challenges, restricted financing and leasing options have led to this trend, but so have the extended warranties provided by automakers and the fact that vehicles are more durable and are of higher quality.
Increased vehicle age and longer ownership periods present opportunities for several industry segments, including dealers and the aftermarket.
"As vehicles age and consumers continue to hold onto them longer, there are significant opportunities for repair services and parts demand for the aftermarket as vehicles are falling out of warranty as they age," stated Mark Seng, vice president, sales and client services, aftermarket and commercial vehicle, at Polk.
"The increased complexity of vehicle repairs also presents a business opportunity for service professionals as traditional do-it-yourself consumers are less likely to attempt complicated technical work on their vehicles," he added.
Meanwhile, dealers can build service loyalty marketing programs to foster long-term relationships with customers.
"The trends we're seeing suggest great motivation for dealers seeking to maintain a longer-term relationship with their customers," said Lonnie Miller, vice president, marketing and industry analysis, at Polk.
"Service-oriented loyalty programs can significantly contribute to improving business and overall loyalty among customers," he continued.
Looking forward, based primarily on current industry trends as well as a full-year auto sales forecast of 11.5 million units, Polk projects that the current conditions of the U.S. auto market will likely stick around through 2010, and that current scrappage and ownership trends will likely persist "for at least another year."
Polk's assessment also assumes that scrappage rates generally move upward as older units continue to be moved off the roads.