I used to think that owning a vehicle for ten years was a wonderful financial accomplishment. Doing so shows constraint from wasting money on buying another depreciating asset too quickly. Holding onto your vehicle for ten years also is a nod to being satisfied with what you have.
However, the latest average age of U.S. vehicles from an S&P 500 Global Mobility report shows Americans are keeping their vehicles much longer than ten years on average.
As of 2023, the average age of U.S. cars is 13.6 years and the average age of U.S. light trucks is 11.8 years. The overall total average of U.S. vehicles is an impressive 12.4 years!
The Desire To Drive A Vehicle Longer Than The Average
Here at Financial Samurai, if we want to build more wealth than the average person, we need to be more fiscally responsible than the average person. Instead of saving only ~5% of our income like the average American, we save at least 20% of our income. Instead of only relying on one job, we earn additional money through side hustles, and so forth.
Given this desire to outperform, we should aim to drive our vehicles longer than the average 12.4 years in America. Spending too much money on a car is one of the top money wasters in this country. By extension, buying new cars too often is another.
We know the average new car price is almost $50,000, an absurd amount given the median household income is only about $75,000. We also know that the median retirement savings balance in America is only around $110,000. The money we spend on cars could be invested for our retirement instead.
I used to believe the ideal length of time to own a car is ten years. However, given the latest data on the average age of U.S. vehicles, I’d like to now suggest we own our vehicles until they are thirteen years old before getting a new one. So long as the vehicle is properly maintained and safe, driving a vehicle for fifteen years seems reasonable.
Why The Average Age Of A Vehicle In America Getting Older
There are several factors contributing to the increasing average age of vehicles in America:
1) Improved vehicle quality
Vehicles today are generally built with better quality materials and components compared to previous decades. Advancements in manufacturing and engineering have led to more durable and long-lasting vehicles. As a result, cars can remain reliable and functional for longer periods, leading to an increase in their average age.
2) Economic factors
Economic considerations play a significant role. The cost of new vehicles has been rising steadily, making it more expensive for many people to purchase brand-new cars. As a result, people are holding onto their vehicles for longer, opting for maintenance and repairs instead of buying new ones.
The cost of both used and new vehicles shot up during the pandemic. In some cases, you could have bought a new vehicle and sold it three years later for the same price.
3) Financing and leasing options
The availability of financing and leasing options has allowed people to spread out the cost of new vehicles over longer terms. This has led to individuals keeping their vehicles longer, as they continue making payments beyond the typical ownership period.
This type of financial engineering is dangerous for consumers because it enables consumers to buy more car than they can comfortably afford. The same thing happened with the housing market, which resulted in a crash between 2007-2009.
4) Improved technology and features
Modern vehicles are equipped with advanced technology and features, such as improved safety systems, infotainment options, and fuel efficiency. As a result, incremental new car features don’t make as big of an impact anymore.
I still remember being thrilled to go from inserting a CD in the dashboard to using Bluetooth to play music. Nowadays, almost every car has Bluetooth as standard. The same thing goes for backup cameras.
5) Reliability and maintenance
With regular maintenance and proper care, vehicles can easily hit 200,000 miles if so desired. If the average person drives 12,000 miles a year, that’s 16.7 years of car ownership. Repairing a car usually the more economical way to go.
The Debate On Driving A Safe Car
One of the financial moves I made that reduced my stress after my son was born was buying a larger vehicle. As a new father, my desire to protect and provide for my family went into overdrive. Owning a compact car with paper-thin doors was no longer going to cut it.
My Range Rover Sport was born in July 2015. It is now about eight years old with no mechanical problems or failing parts. I’ve maintained the car on schedule. And probably change my tires, brakes, and oil slightly quicker than the average person.
So long as my vehicle works, I do not see a problem driving it for seven more years until it is fifteen years old. By 2030, my vehicle will have roughly 80,000 miles on it. Not bad compared to the 130,000 miles I had on the $2,000 hatchback I drove in college.
I just wonder what type of better safety features I will forego by not changing cars sooner. Fifteen years is a long time for auto engineers to come up with better safety features. Hence, at the ten-year mark in 2025, I will have to really consider whether buying a new used vehicle is a good idea.
The Car Buying Plan For Now
As of now, I plan to buy a 2023 Range Rover in 2026. The latest Range Rover was completely redesigned and introduced for sale in 2022. Therefore, buying the 2023 version will help me skip some of the first-year kinks all newly designed vehicles go through.
Buying a three-year-old car from a private party is the sweet spot for getting the best bang for your buck. You skip the largest part of the depreciation curve, yet the car is likely still under warranty with a new-car smell.
However, I might change my mind in 2026 depending on the condition of my existing car, other new cars, and transportation alternatives such as self-driving cars. Waymo and Cruise will expand their self-driving offerings by the end of 2023. If so, I may end up driving even fewer miles on my existing car, thereby extending its useful life.
Finally, the lengthening of the average age of U.S. vehicles bodes well for the average American’s personal finances. As such, this is a bullish data point for the U.S. economy thanks to more disposable income and less car debt. Companies such as Genuine Parts (GPC) that help maintain cars will likely see a continued boost as well.
Reader Questions and Suggestions
Did you know the average age of U.S. vehicles is now over 12 years? How old is your vehicle and how long do you plan to drive your vehicle for?
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