More Off-lease Vehicles Head To The Used Market

About 2.6 million cars and trucks are projected to come off lease and enter the used-vehicle market this year — 8.3 percent more than in 2008. But instead of glutting the market, the boost in off-lease vehicles will be offset by decreases in the number of used vehicles retired from rental service or traded in by consumers for new vehicles, analysts predict. Current wholesale values of many off-lease vehicles — especially SUVs — are much lower than residual-value projections made three years ago, when the leased vehicles were new. Still, Tom Webb, Manheim's chief economist, says he expects overall used-vehicle prices in 2009 to be largely unchanged from last year. Manheim is the nation's largest auto auction company. The additional off-lease cars and trucks "won't have much of an impact on prices because overall volume will be less," Webb told Automotive News. Growing consumer demand for used vehicles — especially factory-certified units — should help prices as well, says Tom Kontos, executive vice president of customer strategies and analytics for ADESA Auctions. ADESA is the No. 2 U.S. auto auction company. Value subtracted Wholesale values of 2006-model vehicles coming off lease — especially SUVs — are much less than predicted when the cars and trucks were new. Values are percentages of original sticker price. 2006 model Predicted residual Actual value Toyota Sequoia 55% 43% Ford Explorer 43 31 Dodge Durango 39 27 Honda Pilot 53 43 Chevrolet TrailBlazer 42 33 Nissan Pathfinder 51 43 Industry avg. (all segments) 46 40 Source: Automotive Lease Guide East Charlotte Nissan has a great inventory of the vehicles mentioned including others not listed.  Visit our site at www.eastcharlottenissan.com   SUVs are hit hard According to Automotive Lease Guide, 2006-model vehicles with leases that ended in January and February retained an average value of 40 percent of their original sticker prices. That average is 6 percentage points lower than the guide predicted when the vehicles were new. By contrast, the guide says, the average resale values of 2004-model off-lease vehicles remarketed in 2007 and 2005 models in 2008 exceeded their initial residual value projections by three percentage points. Prices of off-lease SUVs are being hit especially hard, the guide says. A 2006 Toyota Sequoia typically is fetching 43 percent of its sticker price at auction — 12 percentage points below its original 36-month residual projection. A 2006 Dodge Durango is retaining 27 percent of its sticker price, 12 points below its initial projection. Many consumer lenders base monthly lease payments on Automotive Lease Guide's predictions of residual value. 'Normal fluctuations' Jack Ferry, a spokesman for Mercedes-Benz Financial, says the number of Mercedes vehicles that will come off lease this year will increase by "less than 10 percent" from 2008. He declined to provide unit figures. Prices of used Mercedes vehicles are showing "normal fluctuations" based on the economy, Ferry says. James Clark, editorial director of Automotive Lease Guide, predicts that resale conditions will remain tough for auto remarketers this year. He says: "We have a lot of used vehicles coming back into the market relative to what the size of the industry is today."

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