The American Driver is Changing; And So Is It's Car

Have a clunker that just won’t die? Not only are you in good company, but here is how you can profit from its slow demise.

Jan 26, 2014 at 10:27AM

Auto Graveyard

If your car belongs here, read on. Photo credit: Flickr/Sean McGrath.

The American driver is slowly fading. Not only have we stopped driving as much as we once did, but we're really disappearing altogether. The fact is, we hit "peak car" in 2005 and it's literally been all downhill since that point.

Growing old together
Rising gas prices, as well as the aftereffects of the Great Recession, really put the brakes on the overall miles driven by the U.S. motorist. In an effort to cut back on spending, Americans now own fewer cars per capita, and the vehicles we do own are more than a decade old. In fact, at an average age of 11.3 years old, the American car has never been older. We shouldn't expect that trend to reverse, either. According to IHS Automotive, the average age of the American car is forecast to hit 11.5 years by 2018. While that's a deceleration of the pace of aging, it means that American cars as a whole aren't getting any younger.

Auto parts retailer O'Reilly Auto Parts (NASDAQ:ORLY) has a great slide from a recent investor presentation that visually demonstrates this dramatic shift:

Oreilly Trends

Source: O'Reilly Auto Parts Investor Presentation (link opens a PDF).

As the slide shows, the age of the average American auto on the road today has steadily increased along with the price of gasoline. Meanwhile, the peaking of gas prices in 2008, which is when the recession's effects started to hit, has had a noticeable impact on miles driven. Many Americans are still out of work, or not working as much as they'd like.

The open road of opportunity
Because of this, it's tough to justify the outsized expense of a brand new car. Many Americans instead are opting for a used car, while others are holding on to the one they have. There's good reason for that trend. O'Reilly Auto Parts CEO Greg Henslee noted on the company's last conference call that, "Vehicles today are simply better engineered and manufactured to stay roadworthy longer and go through more routine maintenance and repair cycles as consumers continue to realize the value of investing in these higher-quality vehicles."

That is leading O'Reilly to open nearly 200 new stores each year so that it can help supply drivers nationwide with the parts necessary to keep our cars for a little while longer. Meanwhile, self-service used auto parts seller Schnitzer Steel's (NASDAQ:SCHN) Pick-n-Pull is also seeing growth, opening a handful of new stores last year.

Schnitzer is an interesting play on the aging American car for more than its ability to sell recycled auto parts. As we all know, even the most reliable car eventually becomes a clunker. However, that clunker doesn't have to sit in some auto graveyard to rust away. Instead, Schnitzer can put it to use through its position as one the nation's largest recyclers of scrap metal, including raw scrap purchased from auto salvage facilities. Once more Americans do start saying goodbye to their old, reliable cars, Schnitzer will be there to put them prepare them to be useful once again. 

Final thoughts
That old, reliable car is saving many Americans from the cost of buying a new car. While keeping an older car might require a few hundred dollars in repairs every so often, the overall savings gives its owners a few more dollars to invest. What better way to invest those savings than to turn around and profit from the aging of the American car.

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Fool contributor Matt DiLallo has no position in any stocks mentioned. The Motley Fool owns shares of O'Reilly Automotive. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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