As we’ve noted before, car dealers – who’ve suffered through several years of depleted used-car inventories – are facing what amounts to an embarrassment of riches as a large volume of two- and three-year-old vehicles will be coming off leases in the months ahead.
According to data compiled by the J.D. Power Information Network, the number of off-lease models returning to market will increase by around 800,000 units this year, which represents a 33% boost over 2015.
While dealers will no doubt benefit from the added stock – used cars typically command a higher profit margin than do new vehicles – the swelling supply will cause pre-owned vehicle prices to plummet.
Already, the NADA Used Car Guide’s seasonally adjusted used vehicle price index dropped by 3.6 over the first quarter of 2016, which is the first year-over-year dip since the onset of the Great Recession.
That’s when new-car sales crashed and several automakers to temporarily exit the leasing market, which left used-vehicle lots depleted for several years from an initial lack of trade ins, and fewer off-lease models entering the pre-owned market down the road.
Used-vehicle prices subsequently jumped by more than 18% in the ensuing years, according to J.D. Power; Edmunds.com reports they reached a record average $18,600 last year. This is unprecedented for what is typically a depreciable asset.
Fast forward to 2016 and, depending on the source, used vehicle prices are expected to fall by anywhere between 2.5% and 6% by year’s end, which would place them at their lowest point in this decade.
According to Experian Automotive, astute used-vehicle shoppers should be able to strike the best deals on what have been among the most-leased models over the past two or three years. Though the industry’s most-popular vehicles, the Ford F-150 and Chevrolet Silverado full-size trucks, aren’t represented (while on the upswing, pickup leasing still isn’t as prevalent as it is with passenger cars and crossovers), they include entry-level and luxury crossover utility vehicles, standard and lower midrange sedans, and near-luxury/upscale vehicles.
Altogether, the top 10 most-leased vehicles represent 28 percent of all cars and crossovers coming off two- and three-year leases that are headed back to market.
Experian says shoppers should expect to find the best off-leased used-car bargains in and around cities that have the greatest volume of vehicles coming off lease, specifically the New York, Los Angeles, and Detroit metro areas.
Read more of the original article in Forbes.
