Good WSJ article on Cars lasting longer than ever

Cars' Useful Lives Are Longer Than Ever, Sending Ripples Through Auto Industry February 27, 2006; Page D3

Some people buy cars because they fall in love with the style, the curves, the attitude of something new. But a lot of people buy cars for the same reason they buy a dishwasher: They need an appliance to do a job.

There's good news for the latter group: Cars really are lasting longer, and that is starting to have an impact on the way the car business works from the factory to the dealership.

In 1977, half the cars on the road survived until they were 10.5 years old and you could expect to put about 107,000 miles on a car during its useful life, according to National Highway Traffic Safety Administration data. By

1990, half the cars put into service stayed on the road for 12.5 years, and owners could expect to get 127,000 miles out of their vehicles.

The government's latest survey, using 2001 data, found that 50% of cars were lasting 13 years, and drivers could expect to roll up 152,000 miles on a new vehicle over its life.

The data for light trucks, the category that includes pickups, sport utility vehicles and minivans, make a choppier graph. The government's measure of

50% survival rates for light trucks has bounced from 14 years for 1977, up to 15.5 years in the 1990 sample and back down to 14 years in the 2001 sample. But the expectation for miles traveled over the vehicle's life has risen to 180,000 miles as of 2001 from 128,000 in the 1977 survey.

There are other signs that consumers are hanging on to cars longer. Although

2004 was a pretty good year for new-vehicle sales, with 17.4 million registered, only 11.9 million vehicles were sent to the junkyard. The vehicles scrapped in 2004 were equivalent to just 5.4% of total vehicles registered. A decade earlier, the number of vehicles scrapped was 6.6% of total registered vehicles. At one time, car makers assumed that roughly 8% of vehicles on the road would get scrapped in any given year. ROAD WARRIORS

Passenger Cars Light Trucks* 50% survived until age Expected lifetime travel in miles 50% survived until age Expected lifetime travel in miles

1977 Data 10.5 107,000 14 128,000 1990 Data 12.5 127,000 15.5 154,000 2001 Data 13.0 152,000 14 180,000 *Light trucks include pickups, vans, and sport utility vehicles under 10,000 pounds GVWR.

Scrappage is one of those indicators that fluctuates year by year, and industry analysts consume endless cups of coffee debating its true meaning. A big question is whether scrappage rates will continue to decline (bad for new vehicle demand), or flatten out because car makers don't develop technology that extends vehicle life beyond 200,000 miles. There are other factors, too. Right now, there is about one car for every American of driving age, giving the U.S. the highest "density" of cars to people of any country in the world. Some analysts say Americans have three-car garages and mean to fill them. Others worry that the ratio of cars to people won't change much.

One force driving decisions to keep older cars on the road could be demographics: The generation of Americans now hitting driving age is the largest since the peak of the post-World War II baby boom. Sure, a lot of these kids want a new Scion tC coupe. But most are probably getting the family's old Impala or Camry to drive instead.

The median age of passenger cars -- excluding light trucks -- has moved up over the past decade to 8.9 years from about 7.5 years in 1994. During that same time, the average age of the light-truck fleet has fallen to 6.4 years from just over 7 years. That reflects the increasing use of light trucks as substitutes for family cars, which in turn makes them more likely to get banged up in traffic accidents or run into the ground on multiple road trips.

The auto industry hasn't given up entirely on planned obsolescence: When the industry reports February U.S. car and truck sales this week, it's a cinch that most of the hot sellers will be new models, with fresh sheet metal or new technology. It's an article of faith in the car business that nothing turns a company around faster than a good-looking new car or truck. That's because time after time this has proven to be true.

Nonetheless, sales data also suggest that a lot of consumers put a high value on brands that have a track record of delivering cars that last. The brands that had the biggest market-share gains during the 2000-to-2005 period -- BMW, Toyota, Nissan and Honda -- also had relatively strong records for functional reliability, according to an analysis by Walden Consultants. Chevrolet, Ford, Dodge and Chrysler have lost share or stayed flat in that period, and they also have worse-than-average reliability records -- based on data for repair frequency gathered from consumer surveys conducted by IndustrialMR Inc. Henry Allessio, managing director at Walden Consultants, says Walden zeroes in on repairs that take the vehicle off the road, and concludes that Honda and Toyota have 22% fewer such breakdowns than the industry average.

For car makers, the challenge is clear: They have push themselves harder to create cars that basically don't break, and simultaneously develop new cars that are so compelling in terms of design or technology that some customers will be willing to buy even though their existing ride probably has four or five years left in it.

The ripple effects of the longer-lasting car will hit all areas of the business. Car dealers, for example, have accepted skinnier margins on new-vehicle sales in part because they were able to make it up in the service shop. "Historically, dealers have made a significant amount of their profits, especially the domestics, on warranty work," says Mark Rikess, a consultant who works with auto dealers. Now, there's less warranty work, and fewer recalls. That's forcing dealers to be more creative in making their service operations attractive to consumers who will be paying for the work with their own money.

"One of our clients is very creative," Mr. Rikess says. "When it's raining, he will blast out [emails] to his owner base, 'wiper blades are on sale.' They get 50 people to show up."

This new focus among dealers on generating service business helps to explain the growing number of coffee bars, work areas and kiddie play rooms in newer auto stores. Mr. Rikess predicts more dealers also will invest in systems that allow customers to book service appointments online -- a boon to those of us who feel that time spent waiting for a car to get repaired is still time wasted, no matter how good the coffee is.