Americans are saving money keeping by their old cars. This stock may benefit from that.
Not only are Americans getting older, now so are their cars.
Since 2006, the average age of a car has risen from 9.9 years to 11.4, according to automotive data research company Polk.
What’s interesting to note is that the average age is being pushed up by cars older than 12 years. There are more of them on the road than before. Meanwhile, cars between six and 11 years old have been declining at an average annual rate of nearly 5% over the last five years. Polk believes the share of cars older than a dozen years on the road will increase by 11.6% in five years.
According to a report by AAA, it costs American drivers an average of $9,122 to own and operate a car every year. That’s assuming drivers put in 15,000 miles per year. Out of the total costs, about $3,571 is made of up depreciation, a non-cash cost but a decrease in the value of the vehicle. However, the older the car, the less it depreciates.
As drivers cling to their cars longer, keeping older vehicles running requires maintenance and parts. AAA estimates that it costs nearly $0.05 per mile to maintain an automobile.
That nickel-per-mile gets spent at auto repair shops but also at retailers selling car parts. This includes places like O’Reilly Auto Parts and Advance Auto Parts. But, the largest player by market cap ($16 billion) in the auto parts business is AutoZone, the Tennessee-based retailer operating over 5,100 stores.
Since the start of 2013, AutoZone’s stock is up 23%. However, since the start of the Great Recession, the stock has tripled.
“This is the Home Depot of the automotive world,” says Talking Numbers contributor Richard Ross, Global Technical Strategist at Auerbach Grayson.
But will a company like AutoZone truly benefit as American keep their cars longer? Talking Numbers contributor Enis Taner, Global Macro Editor at RiskReversal.com, looks at the company’s valuations and prospects to determine whether AutoZone has any hope for further upside.
To watch Ross and Taner analyze AutoZone, watch the video above.