According to Manheim, one of the world’s leading provider of vehicle remarketing services, some 2.1 million off-lease vehicles will enter the market in 2014. That’s 1.7 million more than last year. Manheim expects that in 2015, the number will reach 2.5 million, surpassing 3 million in 2016.
Overall, this can be a welcomed change for dealers having trouble finding late-model used cars and trucks on reasonable prices. It would be a nice break from the downward spiral of the constantly dropping new-vehicle sales in the last three years, along with a lease market that became practically non-existent since 2009.
On the other hand, new-car buyers will not be too happy. More used vehicles available will lower the trade-in value of their current vehicle.
Consequently, those lower prices could impact lease terms. Let’s not forget that usually, the financial institution doesn’t charge for the vehicle’s residual value, or what it’ll be worth at the end of the lease. That’s why the monthly lease payments are lower than monthly loan payments for the same vehicle. With dropping used-vehicle prices, residual prices are also bound to fall. As a result, the consumer will end up paying more to make up the difference.
This whole new tendency will interfere with automakers’ practice to rely on leasing to compensate for the higher sticker prices. Staring 2016, such practice may not be as effective as before.
Read the full story at Automotive News.