The auto industry has experienced unprecedented disruption in recent years, from plummeting demand during the work-from-home phase of the pandemic to semiconductor shortages that sent prices surging as inventory shrunk, to the highest auto loan rates in decades. It hasn’t been an easy few years – and ongoing uncertainty about tariff policies in 2025 hasn’t exactly helped.
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While the tariffs are undeniably causing big headaches for carmakers, including those that manufacture vehicles in the U.S. but use foreign parts, the reality is that automakers are actually facing a bigger problem right now that could be harder for them to solve.
Consumer behavior around cars is shifting.
Image source: Getty Images
Tariffs may not be as big of an issue for automakers as this change in consumer behavior
While tariffs are unquestionably an issue for automakers, the Trump Administration is sensitive to the performance of the market and consumer sentiment, and trade deals are likely to be inked eventually. And some experts believe solutions will be found sooner rather than later when Americans prove unwilling to put up with the economic pain.
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Because tariffs may be a short-term factor, they may not cause automakers the most headaches in the coming months and years. Instead, changes in consumer behavior may end up being their biggest source of concern.
Specifically, an analysis by S&P Global revealed that the average age of vehicles in the U.S. has been on a steady climb. We’re now going on two consecutive years of two-month increases in vehicle age, with Americans now keeping their vehicles for a whopping 12.8 years.
Scrappage rates have also remained stable, even though vehicle registrations in 2024 topped 16 million for the first time since 2019. As a result, the average age of the U.S. fleet got even older.
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S&P Global’s analysis indicated that these trends signal a “broader change in consumer purchasing behavior, economic conditions, and the durability of modern vehicles.”
When car buyers keep cars for longer, automaker profits suffer
Americans keeping their cars for longer is good news for the service industry, which is likely to see increased demand for maintenance.
The problem is obvious for dealers, though. When people keep their cars for longer, by definition, they aren’t buying new vehicles as often. This leads to both an immediate drop in demand with fewer potential customers at any given time, as well as fewer vehicles purchased over the consumer’s lifetime.
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Consumers may also get used to life without a car payment and may be less likely to trade up as often. Or, as they keep vehicles longer, they may discover that today’s cars don’t experience as many costly maintenance issues as expected.
This could lead to a permanent change in habits and a continuation of the current trends of holding onto vehicles for an ever-increasing number of years.
Of course, it’s possible consumers are just holding onto their cars longer for now because of the big disconnect between what they’re willing to pay and what cars are selling for.
Edmunds’ research from mid-2024 shows 48% of new car buyers want to spend $35,000 or less on their next new car, and 14% would prefer to keep their spending under $20,000. These desires don’t match reality, though, as the average transaction price was $47,716 at the time, and there were almost no new car options for $20K or less.
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This is not optimistic news for carmakers that are unlikely to be able to bring their prices in line with what consumers are willing to pay. With such a large gap between expectations and reality, there’s even more incentive for potential buyers to just hold onto what they have.
