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Saturday, April 03, 2010

More vehicles being scrapped than purchased, R.L. Polk says

More Americans ditched older cars than bought new ones during a 15-month period ending last September, according to a report released this week by R.L. Polk & Co.

Polk found that more than 14.8 million cars and light trucks were scrapped in the U.S., compared with new vehicle registrations of just more than 13.6 million.

The tally, taken between July 1, 2008, and Sept. 30, 2009, includes thousands of cars demolished during last year's cash-for-clunkers program.

Scrapping statistics are viewed in the industry as a bellwether for future gains in vehicle sales. The higher the rate of scrapping, the more likely that the demand for new and used vehicles will rise -- especially if the economy is improving.

This is the first time Polk's analysis covered a 15-month period, in large part to accommodate the clunkers program. Cash for clunkers gave consumers up to $4,500 in rebates on a new vehicle if the trade-in and new purchase met certain requirements. The program ran from July 27 through Aug. 25, 2009, and was funded with $3 billion in taxpayer funds.

Polk did not compile figures from comparable 15-month periods, but the research company said light-vehicle scrap rates have increased in the past five years.

Higher scrap rates

As of October 2009, the scrap rate was 6.1 percent of the total U.S. light-vehicle fleet, compared with 4.3 percent in July 2005.

Polk, which tracks the ability of automakers to retain customers, expects current trends for scrappage and vehicle ownership to continue for at least another year. The assessment assumes a general upward trend for vehicle scrappage rates as high volumes of older vehicles continue to retire from the U.S. fleet, according to the report.

The average age for all light vehicles during the 15-month period is 10.2 years, a trend supported by Polk's research that consumers are keeping cars and trucks longer. As of September 2009, the average length of ownership for a new or used vehicle was 49.9 months, up from 45 months at the same point a year earlier.

The economy, limited financing and leasing options, extended warranty offers and improved vehicle quality support the longevity trend, according to Polk. The company said this could provide increased business for various segments of the industry.

“As vehicles age and consumers continue to hold onto them longer, there are significant opportunities for repair services and parts demand for the aftermarket as vehicles are falling out of warranty as they age,” Mark Seng, Polk vice president of sales and client services, said in a statement.

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