Monday, September 12, 2011

Vehicle Sales: Fleet Turnover Ratio

by Bill McBride on 9/12/2011 12:00:00 PM

Back in early 2009, I wrote a couple of posts arguing there would be an increase in auto sales - Vehicle Sales (Jan 2009) and Looking for the Sun (Feb 2009). Here is an update to the U.S. fleet turnover graph.

This graph shows the total number of registered vehicles in the U.S. divided by the sales rate through August 2011 - and gives a turnover ratio for the U.S. fleet (this doesn't tell you the age or the composition of the fleet, registered vehicles estimated).

The wild swings in 2009 were due to the "cash for clunkers" program, and the increase in the ratio this summer was due to the supply chain issues related to the tsunami in Japan.

Fleet TurnoverClick on graph for larger image in graph gallery.

The estimated ratio for August was just over 20 years - still very high, but well below the peak of 26 years.

The turnover ratio will probably decline to 15 or so eventually.

Vehicle SalesThe second graph shows light vehicle sales since the BEA started keeping data in 1967. The dashed line is current estimated sales rate.

The current sales rate is still near the bottom of the '90/'91 recession - when there were fewer registered drivers and a smaller population.

Light vehicle sales were at a 12.12 million seasonally adjusted annual rate (SAAR) in August. To bring the turnover ratio down to more normal levels, unit sales will have to rise to 14 or 15 million SAAR.

Of course cars are lasting longer - note the general uptrend in the first graph - so the turnover ratio probably will not decline to the previous level. Also this says nothing about the composition of the fleet (perhaps smaller cars). But I do expect vehicle sales to continue to increase over the next few years.