The average age of vehicles on American roads passed 12.5 years old this month. This time last year, cars were 12.2 years old on average. There are now 122 million vehicles older than ten years cruising around.
This is due to tight new car supply and inflation in new vehicle pricing. Yes, increases in interest rates are a factor, but people focus more on payments than interest rates. The larger factor is the average new car purchase price of $47,713 in April 2023. That is more than $850 a month on a 60-month loan. Used car purchases almost broke the $30,000 barrier. Because used cars rarely have incentivized rates, that’s a payment closer to $600 for 60 months.
Many customers don’t understand how much equity they have in their cars. That isn’t a headline in the news. The focus is on how hard it is to get a car and how expensive they are.
People make different decisions when they realize their car is worth thousands more than they thought.
I’m in a different boat. My wife has a 2015 Mercedes GL350 with 140,000 miles. It is a tank of a diesel that drives great and goes ~600 miles between fill-ups while
comfortably luxuriously carting our five-person family around. Diesels are good for hundreds of thousands of miles, and ours has been quite reliable. It is the rest of the vehicle that needs help.
I’m spending between $2,000 and $4,000 yearly on maintenance and repairs for her Merc. That’s a win! I’m not spending $12,000 a year paying for the car itself.
But we are annoyed every time we have to take it into service. That’s 2 to 5 days without the car, and initial quotes always appear to be more when it is time to pay for the repair order. It is incredibly inconvenient and usually comes with frustrations and interruptions for approval before more work is done. Her car is in the shop for a recall right now. One of the airbag suspension components came loose, and we’ve been back and forth with the shop 12 times to get $1,600 of different work approved (2 alignments, for example). The back and forth is annoying because the shop never gives enough information for me to make a decision.
After a few years of having the car in the shop multiple times a year, my wife hit me with the dreaded statement:
“What if I get stranded with the kids?”
Despite my perceived savings of $8,000 to $10,000 per year, I am now in the market for a new car. Apparently, there is a price for convenience as we view a new car as 3 to 5 years of trouble-free driving.
The moral of the story is two-fold. Customers don’t realize how much equity they have, which significantly affects how much lower their payment will be. And there is value in convenience that will make people spend more.
SERVICEiQ is a great solution for helping your service customers realize their equity potential. Not only does it not impede your current sales and service processes, it incepts the idea into the customer’s head while ensuring them you want to earn their business again. It is a loyalty engine. Get a demo.