Average age of auto trade-ins falls, good sign for manufacturers
1/15/2011LOS ANGELES — The average age of the vehicles being traded in on new-car purchases is going down — a good sign for the auto industry.
According to figures from auto information company Edmunds.com, the average age of trade-in vehicles has fallen steadily to just over 5 years in November, from nearly 5.8 years in January.
That may be an early signal that consumers are loosening their purse strings and are starting to purchase cars just because they want a new vehicle.
Much of the retail segment of the auto market for the past two years has been people whose vehicles were worn out and needed to be replaced.
"If this stands, it shows that people are feeling more comfortable buying new cars and this would be good for the market," said Jessica Caldwell, an analyst at Edmunds.com.
She said she wanted to see the data from January and February before she would be willing to say that the lower age of trade-in vehicles indicated a rally in sales.
To be sure, there's no great stampede of buyers to showrooms, but people eventually have to replace their cars at some point, and over the past three years many owners held off to wait for better times.
"What we are seeing is an increasing willingness of people to replace their vehicles," said George Pipas, sales analyst at Ford Motor Co.
Auto sales came in last year at 11.6 million, up 11 percent from 2009. Although that's better than a year ago, it is far fewer than 17 million in sales in the peak years of last decade.
In a normal market the average age of a trade-in is less than 5 years.
It was 4.8 years as recently as 2006, Ms. Caldwell said.
The decline in recent months "is consistent with what we're seeing in our showrooms," said John Krafcik, chief executive of Hyundai Motor America, the U.S. division of the South Korean automaker.
But "industry retail volumes are still very low by historical standards, and we've got a ways to go before the industry can declare victory."