Car repair shops profit as drivers hold on to their aging vehicles
One recent weekday at Jay’s Auto Repair in Detroit, cars filled the dozen bays and overflowed into the parking lot as mechanics worked to fix the backlog of vehicles needing repairs.
That's become the new normal as customers try to hang on to their aging cars, SUVs and pickups during a time of surging prices for new and used vehicles, said Jay Salaytah, who owns the service shop on the city's east side.
“This past year has been nonstop,” he said. “We are surprised at how busy it’s been and how crazy it’s been. We’ve been so short-handed trying to get enough help that we can’t keep up with the volume. It hasn’t died out.”
There are reasons for that. The average age of vehicles in the United States has hit a record 12.1 years, according to data provider IHS Markit. Cars and trucks are staying on the road longer, experts say, partly due to improved vehicle quality in the past 15 years.
At the same time, the global semiconductor shortage has crimped auto production just as demand is reviving from pandemic lows, pushing up prices for new and used vehicles and leading some consumers to spend more to keep their current rides on the road.
That means more business at repair shops — if they can find the help.
“For the most part, we see a lot of mechanical repair facilities being successful,” said Ray Fisher, executive director of the Texas-based Automotive Service Association. The reason? “I think the price of cars. People are holding on rather than purchasing new.”
The average price of a new vehicle totaled $40,948 last month, up 5% from $38,967 in June 2020, according to Edmunds. Used car prices have risen even faster: The average price of a 9-year-old used car was $13,252 last month, up 29% from $10,226 in June 2020.
“There’s a multitude of factors,” said Ivan Drury, senior manager of Insights for Edmunds. “If we look at the year, people not driving around as much, naturally we were going to ratchet up that age of vehicles on the road even higher. You combine that with the (fact that) durability of vehicles has gotten so much better over time. Instead of these older clunkers, you’ve actually got these older, nicer vehicles at the same time.”
Gone are the days when owners worried about their vehicles surpassing 100,000 miles, he added. Drivers became more comfortable keeping a higher-mileage car during the recession in 2008, when job losses and the housing crisis forced many to hold onto their cars longer.
“They saw that the average age of the trade-in went up — so did the miles,” he said, in part because vehicle quality improved dramatically in the mid-2000s. “People learned that lesson that ‘hey, these cars last longer than we thought.'”
At Jay’s Auto Repair, most of the vehicles they service are from the 2011 to 2017 model years, Salaytah said: “That’s the majority of our work right within that range, but we do see a lot of '07s and '08s still on the road, and people still put money into them."
"Where 10 years ago, a car 10 years old, people wouldn’t have put two, three grand into it," he added. "Now they’re doing it. You get a 2011 Equinox, to replace a motor, rebuild a motor is three, four grand, and they’re spending it.”
Salaytah said he believes people are putting money into their vehicles from the $1,400 federal stimulus payments distributed this spring. The increase in wages resulting from the labor shortage has helped, too.
One of Salaytah's customers, Blair Hilson of Detroit, says he prefers to invest in his 2011 Chevy Malibu instead of buying a new one. The Chevy fan says his car has about 150,000 miles and has no plans to get rid of it.
“I worked two jobs and paid it off in full,” said Hilson, 22. “It’s my prized possession.”
Hilson said he’s spent more than $2,500 on his car in the past two years, including a new transmission and wiring. His family also surprised him with new rims and tires. That cost $1,200.
“It’s great having a new vehicle, but it’s not cost efficient for everyone because insurance is so high,” he said. “Depending on what your note is, you’re paying $300 or $400 or more, and your insurance is just as much."
Hilson said he's noticed the impact the chip shortage has had on inventory and vehicle prices.
"That shortage is making a huge difference in that price and in that value," he said. "For someone that's looking to get a new vehicle, I wouldn't recommend it at this time because it's so tough."
Bret Row, owner of Auto Lab in Plymouth, Mich., said people keeping their cars longer is great for business, a trend he attributes to high sale prices.
“We definitely notice older cars on average coming in,” he said. “People are willing to fix that older car where in the past maybe they would not have fixed it.”
A recent customer with a 2003 Ford Taurus helps make Row's point. The car was in OK condition but needed a $3,200 repair, which the owner decided to have done.
“That person spent quite a bit of money to replace the transmission, where sometimes in the past somebody would say, ‘I’m not fixing this car,’" he said. "They would have moved on.”
Mark Sullivan, auto repair manager at the Plymouth shop, says some jobs are taking longer these days because of delays in obtaining parts: “If everything was normal, it would be a couple hours; now it’s like same day if you’re lucky.”
It’s been harder to get parts quickly since COVID-19 restrictions were lifted and businesses began opening back up, he said, with brake jobs among the repairs being delayed. Pent-up demand is a factor.
“Cars sat for almost a year,” Sullivan said. “Now you’re still doing a year’s worth of work because cars still needed it, but (owners) didn’t do it. Now all of a sudden everybody needs their car to go to work next week instead of them getting it done throughout the year.”
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