Lenders likely to withstand threat of aging vehicles, analysts say | Auto Finance News | Auto Finance News

Lenders likely to withstand threat of aging vehicles, analysts say

The average vehicle age in the U.S. continues to climb, yet lenders have little to worry about, analysts said.

The average age of light vehicles in operation has risen to 11.8 years, thanks to better technology and overall vehicle quality improvements, Mark Seng, director of IHS Markit‘s global automotive aftermarket practice, said in a press release.

Despite the notion that an aging vehicle fleet translates to slower vehicle sales, 11 year-old-vehicles are rarely financed, said Cox Automotive Chief Economist Jonathan Smoke.

“The rising average age of vehicles on the road has created a market where turnover is declining, but that doesn’t mean that lending is on the decline,” Smoke said. “Instead we’re seeing continued growth in used retail sales that are increasingly younger and more expensive vehicles that are being financed.”

Likewise, Edmunds Senior Manager of Industry Analysis Ivan Drury pointed out that population growth will offset aging vehicles. “As our population grows, more shoppers are introduced to the buying pool,” he said. “This should further help balance things out.”

IHS Markits’s Seng said the 40% drop in new-vehicle sales due to the recession “created an acceleration in average age like we’ve never seen before.” He said during that time, the average age of light vehicles increased more than 12%. Since then, the average age has returned to a more traditional rate of increase – 4% in the past five years.

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