New research from IHS Markit shows that the average age of light vehicles in operation (VIO) in the US has risen to 12,1 years this year, increasing by nearly two months during 2020 and elevated by the Covid-19 pandemic.
The increase in average age will further drive vehicle maintenance opportunities from an increasingly aged vehicle fleet.
Covid-19 and its impact across the US caused a drastic reduction in new vehicle sales as well as a sudden increase in vehicle scrappage, which was a catalyst for increased velocity in the growth of the average age of light vehicles.
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.
In early 2020 the pandemic put significant pressure on new vehicle sales as dealerships worked to implement modified sales processes and deliveries to adhere to social distancing guidelines and create a comfortable vehicle purchasing experience for consumers, even moving some transactions online.
A strong finish to 2020 demonstrated the resilience of new vehicle registration as over 8 million new vehicles were registered in the second half of the year, bringing new registrations up to 5,1%of VIO for the whole year.
While new vehicle sales proved resilient, the most significant impacts to VIO from the pandemic were felt in the rate of vehicle scrappage and vehicle miles traveled.
Scrappage, the measure of vehicles exiting the active population, saw its highest volume in two decades at over 15-million units, and second highest rate at 5,6% of VIO. Vehicle Miles Traveled declined year over year by over 13% in 2020 due to lockdowns and work from home policies.
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.
“2020 was a radical departure from the norm and challenged assumptions about how vehicle owners use their vehicles and accumulate miles; from a vehicle fleet perspective, one of the real surprises was the number of vehicles that suddenly exited the active population,” says Todd Campau, associate director of aftermarket solutions at IHS Markit.
According to the analysis, the rate and mix of vehicles leaving the population point to the possibility that the volume may be inflated due to a larger percentage of vehicles that may not have been registered due to lags in state requirements for registration renewals, more vehicles being put into ‘storage’ due to Covid-19 restrictions in many locations and work from home initiatives.
2021 offers two related factors that are expected to mute average age growth, according to IHS Markit analysis.
The ongoing microchip shortage is expected to continue to challenge new vehicle production volumes through the fourth quarter 2021, but rounding out the year, IHS Markit expects US light vehicle sales to reach 16,8-million according to current forecasts, which can be expected to mute average age growth.
In addition, during the height of pandemic, some vehicle owners may have allowed registrations to expire because their vehicles were not being driven.
“The microchip shortage and subsequent inventory levels for new vehicles have created a situation in which used vehicle values have gotten extremely high, so a vehicle owner who may have kept a vehicle in the garage that they were not using in 2020, now instead may take advantage of the opportunity to either reduce the number of vehicles in their garage, or trade up to something newer while the demand and value is extremely high on their used vehicle,” says Campau.
“This is great news for the aftermarket as subsequent vehicle owners typically have a higher propensity to use independent repair shops for necessary maintenance and repair.”