Used vehicles are expected to continue to command higher prices for the foreseeable future, but the reason may not be as simple as lower availability amid higher demand.

Based on data from IHS Markit, one might conclude that vehicles in operation in the U.S. are set to shrink, given what happened in 2020. But so far in 2021, the trend is reversing.

Scrappage rates hit their second-highest point in two decades last year and outpaced the rate of new vehicles being added to U.S. roads. That probably won’t be the case this year.

About 15 million vehicles were scrapped last year, a rate of 5.6 percent of vehicles in operation, according to IHS Markit. At the same time, new-vehicle registrations increased the number of vehicles in operation in the country by 5.1 percent.

IHS Markit tracks scrappage, or the number of cars and trucks no longer on U.S. roads, by getting data on:

  • Exports
  • Branded vehicles — those labeled a total loss by an insurance company
  • The number of vehicles that should have been registered with their states but were not.

Todd Campau, the research firm’s associate director of aftermarket solutions, said that last metric likely would have covered fewer vehicles last year, thus lowering the scrappage rate, “had we not experienced a pandemic.”

Many people may have simply not registered their vehicles last year, Campau said. Perhaps they didn’t need to use them because they weren’t going anywhere, or maybe their home states allowed for delays in registration.

“I think during 2020, what we observed in the data is that people made the decision to actually effectively not re-register their vehicle, which drove our percentage of scrappage up higher than it had been in recent years,” Campau said.

So far in 2021, with COVID-19 cases declining and vaccination rates generally on the rise, Americans appear to be more active. At the same time, used- and new-vehicle sales have been brisk.

And so, too, have registrations. March had the highest new- and used-vehicle registrations in the last decade, according to IHS Markit.

“People who may have said, ‘I’m not registering that vehicle because I’m not using it right now,’ in 2021 are now making the decision of, ‘I don’t think I need that vehicle anymore, and I can either sell it for more than I thought I could, or I can sell it and pay off my loan completely. Whereas in 2020, the residual value on my vehicle, I wouldn’t have been able to do that,’ ” Campau said.

IHS Markit forecasts total vehicles in operation to grow to 284 million by 2026 from 279 million this year. A key factor is the rising average age of vehicles on U.S. roads, which was 12.1 years as of Jan. 1, up from 11.9 years the year before.

Within the total population of vehicles in operation, Campau said he expected the number of used vehicles to stay relatively large because of record annual new-vehicle sales from 2015 to 2019.

However, it’s clear that newer used vehicles — namely those cascading into the market from 2020 and 2021 — will be in lower supply. This is because there were fewer new-vehicle sales last year, and sales this year are likely to be below 2019 levels amid the chip crisis, especially fleet volume.

Total U.S. light-vehicle sales last year were 14.6 million — the lowest volume since 2012. IHS Markit is forecasting sales of more than 16 million this year.

The research firm looked at the expected change in vehicle age distribution from 2019 to what is forecast through 2024.

During that period, the number of vehicles that are new to less than 3 years old is expected to shrink by 3 percent, and vehicles 3 to less than 6 years old are expected to decline by 7 percent.

At the same time, the number of vehicles that are 6 to 11 years old is expected to grow by 33 percent.

Campau said the shrinking number of newer vehicles is not surprising.

“We came off of five years of over 17 million units” in new-vehicle sales, he said. “Unless you’re going to continue to set records going forward, there’s obviously going to be a breather, and that’s what we’re seeing in the new-to-3 [year-old vehicles] there.”