The average age of passenger cars on the road is now up to 9.4 years---a new record according to R.I. Polk & Co. The average pickup or sport utility vehicle on the road is older than at any time in the past decade at 7.5 years.
Vehicles are better built and more durable now than they were 10 or 20 years ago. But they don't last forever. At some point, the huge population of cars put on the road during the boom years of the late 1990s and early years of this decade will need to be replaced.
Cars and boomers are lasting longer.
Vehicles made in Europe, where fuel prices have been much higher than in the U.S., last for a long time. For example, I now drive a 1989 Merkur Scorpio that was made by Ford in Germany (to compete with the small BMW & Mercedes cars) and imported to the U.S. in 1988 & 1989 only (due to an unfavorable exchange rate). My current Merkur Scoprio is the third of this model that I have owned---with the first two becoming 'parts cars' after each vehicle longed in more than 190K miles.
Last week, after having dinner in downtown Ann Arbor, I found a note under the wiper blade of my Merkur Scorpio saying, "I used to own one of these cars and LOVED IT! I hope you love yours, as well. From Pennsylvania"
That note and my good experience with the three Merkur Scorpios discounts an unfortunate remark made in The Wall Street Journal by Alex P. Kellogg on Monday, March 9, 2009 who criticized Ford Motor's plans to produce European designed autos in the U.S. in the near future: "While Americans are enamored of foreign luxury cars, many previous attempts by Detroit car makers to bring vehicle designs to the U.S. have flopped. In the 1980s, Ford Motor Co. imported a sports car made in Germany, the Mercury Merkur, but sales were sluggish." This quote makes me question if Mr. Kellogg bothered to ask any Merkur Scorpio owners their views of these automobiles and he certainly didn't get the brand name of the vehicle right in the WSJ article.
A Credit Lesson and Why People are not Buying New Vehicles
Self-liquidating credit is a loan that is paid back, with interest, in a moderately short time from production. Production facilitated by the loan – for business start-up or expansion, for example – generates the financial return that makes repayment possible. The full transaction adds value to the economy. Non-self-liquidating credit is a loan that is not tied to production and tends to stay in the system. When financial institutions lend for consumer purchases such as cars, boats or homes, or for speculations such as the purchase of stock certificates, no production effort is tied to the loan. Interest payments on such loans stress some other source of income. Contrary to nearly ubiquitous belief, such lending is almost always counter-productive; it adds costs to the economy, not value. If someone needs a cheap car to get to work, then a loan to buy it adds value to the economy; if someone wants a new SUV to consume, then a loan to buy it does not add value to the economy.