Millions Of Nearly New Cars And Trucks Head To Market This Year – Forbes
Millions of off-lease cars and trucks are heading for the used-car market this year and next, a big increase in the supply of “nearly new” used vehicles.
The upshot for consumers is that sooner or later, the increase in supply should cause used-vehicle prices to fall, for both cars and trucks.
According to J.D. Power and Associates, nearly 3.4 million leases are expected to expire this year. That’s a 9 percent increase over 2016, on top of a 33-percent increase last year, the research and consulting firm said.
Off-lease volume bottomed out in 2012 at only about 1.3 million. In 2018, lease maturities should reach 3.7 million, J.D. Power said. Volumes of off-lease vehicles hit bottom in 2012, because that’s three years after new-vehicle sales hit bottom, in 2009.
Off-lease volumes are just about completely predictable. The vast majority of leases last 36 months. Most people stay in their cars until the end of their lease. At that time, most people walk away from their lease, as opposed to purchasing their own off-lease vehicle. And lease customers are highly likely to stick with leasing on their next new vehicle.
What’s less predictable is the effect on used-vehicle prices. Despite the increase in supply, used-vehicle prices are stronger than expected, analysts said.
Besides consumer demand overall, sales of certified pre-owned vehicles are helping support used-car prices. So-called CPO cars and trucks are more expensive than typical “as-is” used cars, but CPO units come with a manufacturer’s warranty, and they are reconditioned to fix or replace a strictly enforced (by the manufacturer) check-off list of commonly worn-out items.