Lang Aftermarket iReport: Longer car ownership shifts DIFM (Do-It-For-Me)
“New vehicle buyers are keeping them much longer than the typical ownership cycle of just 10 years ago. Last year, buyers had retained new vehicles an average of over eight years. This is up 65% from 2010, when the average buyer held on to their new car or light truck approximately five years before replacement.
“The lengthening new car and light truck ownership cycle offers Dealers extended repair and maintenance opportunities for the vehicles they sell. This presents marketing challenges for Independent (non-Dealer) repair outlets, especially for vehicles entering the lucrative repair-age sweet-spot.””
— Jim Lang, publisher, Lang Aftermarket iReport
Buyers Keep New Vehicles Longer
The selling price of new cars and light trucks continues to escalate, extending financing periods, and buyers are holding on to them much longer than they did just a few years ago.
New Vehicle Ownership 10 Years Ago
As recently as 2010, buyers drove new cars and light trucks five years on average, before replacing them.
With the relatively rapid ownership turnover of just a few years ago, Dealer bay business was focused on vehicles under 6 years of age, with older cars and light trucks migrating to Independent (non-Dealer) repair outlets.
Longer New Vehicle Ownership Cycle
Over the past 10 years, consumers have significantly extended the time that they keep new cars and light trucks. Last year, buyers had retained new vehicles an average of more than 8 years.
This is a 65% jump over the 5-year average time that vehicle buyers kept new cars and light trucks as recently as 2010.
Uncertain New Vehicle Sales
Prior to the 2008 great Recession, Dealer bays typically conducted warranty work and maintenance for the vehicle nameplates they sold that were under 6 years old.
New car and light truck sales have fallen over 35% during April and May this year with widespread uncertainty as to what will happen in the coming months. If the 2008 Great Recession is any guide, it could take four years or more for new vehicle annual volume to return to pre-2020 levels.
With the experience of 2008 still vivid in their collective minds, many Dealers will quickly adjust their service bay strategies to compensate for lower new vehicle 2020 volume.
Sweet-Spot Repair Opportunity for Dealers
Dealers have the opportunity to get some relief from the new vehicle sales downturn by an infusion of service bay business from buyers who are keeping their vehicles two-thirds longer than just few years ago.
Many Dealers intend to develop substantial bay business from vehicles entering the repair-age sweet-spot (vehicles 6 to 11 years old with high rates of parts replacement) that traditionally have gravitated to Independent (non-Dealer) service outlets.
Challenges for Independent Repair Outlets
Independent service outlets need to recognize and adapt to the changing new vehicle ownership cycle and the evolving bay strategies of Dealers, who are targeting all makes and age groups of vehicles.
The devastating impact of the 2020 Virus on the new car and light truck market will make Dealers more aggressive in expanding their service bay activities into areas of the vehicle population that previously have been the domain of Independent repair shops.
Six Major Takeaways
- Rising new car and light truck prices, higher quality vehicles, and longer vehicle financing periods have combined to motivate buyers to keep their new vehicles longer than ever before.
- The 2008 Great Recession, which depressed new vehicle volume for more than 4 years, caused a sharp downturn in Dealer bay business, which historically had been focused on vehicles under 6 years old. Many Dealers, because of their experiences 10 years ago, will be quick to refocus their bay activities in 2020.
- Many Dealers, since the 2008 Great Recession, have already adopted a bay strategy extending over all makes and all years of vehicles. The 2020 Virus will accelerate this trend.
- With new vehicle buyers keeping them an average of more than 8 years, Dealer bays have the opportunity to promote repair among vehicles entering the so-called repair-age sweet-spot (6 to 11 years).
- The longer period of new vehicle ownership, which could increase even more in the next few years with the economic woes faced by Americans, will change the competitive dynamics of the light vehicle DIFM (Do-It-For-Me) market.
- Independent repair outlets must recognize that Dealers will become more aggressive in expanding their service bay activities to older vehicles of all makes, given the sharp downturn in the new car and light truck market created by the 2020 Virus.
Copyright 2020 by Lang Marketing Resources, Inc.
NOTE: Special thanks to publisher Jim Lang for granting us permission to publish the Lang Aftermarket iReport.