By on April 9, 2014

Cadillac-Pre-owned

New-vehicle sales are on the rise due not only to demand originally held back by the Great Recession, but by consumers coming off of their leases for their next latest and greatest.

Automotive News reports Manheim Auctions chief economist Tom Webb proclaimed that off-lease volume will be on par with new-vehicle sales throughout 2014 before surpassing sales the following year and into 2016, forecasting over 3 million new leases signed in that year alone:

If you consider that new vehicles are increasingly being bought by high-income households that do, in fact, want to trade on a regular cycle, then they should be in a lease, not a retail contract.

Webb added that since residual risk “always has to reside somewhere,” the perfect place for such risk would be none other than the lessor “who has a portfolio of vehicles and hopefully also has a professional remarketing arm.”

Speaking of remarketing, Webb says the certified pre-owned market is in good health, with sales of CPO vehicles outpacing the off-lease market for the third consecutive year in 2014, with the latter providing the foundation stones for the former.

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29 Comments on “Off-Lease Consumers Add Fuel To New-Vehicle Demand...”


  • avatar
    FormerFF

    “If you consider that new vehicles are increasingly being bought by high-income households that do, in fact, want to trade on a regular cycle, then they should be in a lease, not a retail contract.”

    While I don’t doubt there are a number of these households, I’d be surprised if they’re that large of a percentage of the market. What I see around me are people buying new cars and then keeping them for a minimum of eight years, in many cases more like 12.

    • 0 avatar
      PrincipalDan

      I think it depends on the consumer for a particular marque. People buying new Chevys, Fords, Toyotas, and Hyundais are likely keeping for a while. I’m sure leases on Mercedes, BMW, Porsche, etc. are more popular for those brands than the lesser brands.

      Give then the way many of the B&B only buy used versions of enthusiast cars I think they should be happy about that.

      • 0 avatar
        slance66

        There are a whole lot of people driving a lot more car than they really should be, at least here in the Boston area. I believe that most of them are leasing. My neighborhood is split between folks leasing new luxury cars every few years and people driving cars for a long time, whether luxury brands or not. The CPO market gives people who want to drive a car over a long life a place to shop.

        But the brand doesn’t tell you much. My CPO BMW was $24k and my wife’s used RX350 was $27k. Anybody with a new minivan, CUV/SUV or truck paid more, and so did a lot of people in Fusions, Accords and Camrys.

        • 0 avatar
          timcc23

          Slance66, I’m with you. Most people don’t realize that you can pick up a lightly used RX350 for less than a loaded Accord/Fusion/Camry. You will pay more in maintenance and repairs than said midsizer, but I still think you come out ahead. The public just assumes that you forked over more money if it is a “luxury brand.”

  • avatar
    28-Cars-Later

    This is good news for wholesale as supply should slowly start to creep up over the next few years and in theory some values return closer to reality. I’ll be interested to see production figures for 2014 at the end of the year, I believe overall figures have been up each year since MY12.

    “Webb says the certified pre-owned market is in good health, with sales of CPO vehicles outpacing the off-lease market for the third consecutive year in 2014”

    Somebody has the buy those MY11/12 production increases. The $64,000 question in my mind is, how good will these cars be to their owners in five years? Folks say “cars today are better than they have ever been” and frankly I’m not buying it. High pressure fuel systems, endless sensors, and other proprietary systems oh my.

    • 0 avatar
      CoreyDL

      I still don’t see HOW we sell so many brand new cars every year, when we have a very high average age of car on the road (11 years or what have you). People aren’t dumping these old cars, they’re still driving them. Where are all the new cars going?! Are they parked next to the older cars in the garage, and people are car hoarding?

      • 0 avatar
        jmo

        There are 254 million registered passenger vehicles in the US. If the number remains stable then for every new car sold – one is getting junked.

        2008 – 254,403,081

        2009 – 255,917,664

        2010 – 254,212,610

        2011 – 250,070,048

        2012 – 253,108,389

        http://www.rita.dot.gov/bts/sites/rita.dot.gov.bts/files/publications/national_transportation_statistics/html/table_01_11.html

      • 0 avatar
        Dan

        Pretending that yearly sales are flat for the sake of a simple example, keeping up that 11 year average would mean dumping them at 22. How many 1991-92 models do you see out there?

        • 0 avatar
          28-Cars-Later

          Those models were not designed for a 20yo life expectancy, also emissions zealots in gov’t intentionally have removed many more which could still in theory be running.

          Additional: I had a ’90 Town Car till 2010, a ’90 Audi 100 till 2011 and presently own a ’93 Volvo 240.

          • 0 avatar
            Lie2me

            I think this is part of the answer, you have several (four?) cars, I have three, had four until not too long ago. Two+ cars per driver is not that uncommon

        • 0 avatar
          duffman13

          I have a 1992 model! Granted, it’s my winter and hauling stuff beater, and we have 2 other cars. I don’t see much that’s older than 1995-2000 in my area, maybe some EF and EG chassis civics and similarly aged Accords or Camries.

      • 0 avatar
        28-Cars-Later

        @Corey

        That’s the new trend, the avg life expectancy of a cheap car produced in the early/mid 90s was around 10 years. When we started getting in well worn early to mid 90s stuff in 04/05, it could be made to keep going but aside from outliers like LS400, Legend, etc and “nicer stuff” people kept going (Town Cars, C-body Cadillac), many of the cars were well into beater status. The economy wasn’t as bad as people remember in the mid 00s and lots of folks didn’t opt to keep their beater grade cars going, but now they do. Used valuation was also so much lower and thus even for folks like me going from complete beater to 5-7yo car, the 5-7yo car was much cheaper than it is today. One of the wholesalers I knew got a batch of cars in right after I left the business in summer 2006 and my gf at the time needed a car. Three S-series Saturns 96-98, 60-70K and an 02 Grand Am/94K. He was going to “hook me up” with the G/A for 4 and the Saturns for 2 and change apiece if she wanted them (she did not). I found out later from his partner they had about 2500 in the high miles G/A (a FOUR year old car at the time) and about $800 apiece in the 8-10yo cleaner Saturns. Try doing that today.

      • 0 avatar
        FormerFF

        Part of this is that there’s a hole in the car population for the worst years of the Great Recession. I suspect that’s keeping some older cars on the road, plus it skews the average age as the number of 3 – 6 year old cars is depressed.

        I’ve always wondered about that average car age as well. I read another statistic that said that cars are an average of 19 years old when junked. That strikes me as a bit high. A 19 year old car driven 12,000 miles a year would have 228,000 miles, while one driven 15 years would have 285,000 miles, which seems a little high. It makes me think that there are a fair number of older cars that don’t make it to the scrapper for a year or two after they stop being driven.

        • 0 avatar
          28-Cars-Later

          You have a great point on the “hole”. High point of production was CY2007 with just over 17 million units for N.A. I think it dipped as low as 9 1/2 million in CY2008-09 and I think only started to recover in CY2012 with around 12 million units. I was surprised even last year when 2012 figures were so high, as I predicted a ten year production depression ending around 2017.

    • 0 avatar
      jjster6

      “This is good news for wholesale as supply should slowly start to creep up over the next few years and in theory some values return closer to reality.”

      High values are reality. YOu may not like it or agree with it, but it is reality.

      Just trying to quibble.

      • 0 avatar
        28-Cars-Later

        Not necessarily as valuation takes many factors into account including region. Another big factor is financing, once something gets too old and banks stop wanting to finance it the artificial wholesale value will decline.

  • avatar
    jmo

    “High pressure fuel systems, endless sensors, and other proprietary systems oh my.”

    So, progress in: metallurgy, material science, manufacturing quality control, etc. stalled out when?

    • 0 avatar
      28-Cars-Later

      I can’t speak to the first two, but “quality control” is starting to look more like “kwality kontrol” since the mid 90s.

      Just look at the figures from 1994 on alone:

      Ok…
      1994: 6,202,000

      then oops:
      1995: 18,121,000

      then worse:
      2000: 24,646,000

      still bad:
      2003: 19,098,000

      Ok we got it:
      2008: 8,600,000

      Nope, we don’t got it:
      2010: 20,000,000

      Now add even more complex systems to the mix since we can’t even get simpler cars correct.

      http://www.statisticbrain.com/automobile-recall-statistics/

      https://autos.yahoo.com/news/top-10-biggest-recalls-of-2013-174809182.html

      • 0 avatar
        jmo

        Recalls? That a pretty poor metric. Repair trips at 5 years is a pretty good metric and that has all declined significantly over the past 20 years. When the LS400 came out in 1989 it rocked the quality world with 0.89 trips per year. Now, some cars are 0.20.

        • 0 avatar
          28-Cars-Later

          You cited manufacturing quality control, and while recalls are valid I agree they are not the only metric. You mention trips, I assume you refer to unscheduled trips since no link or reference was cited. What about scheduled trips over the first 100K, i.e. the maintenance cited in the owners manual? Has mfg maintenance gone down, up, or remained constant since 1995? If you argue I can buy a car new and only spent 0.20 unscheduled trips per year in a 5year/10K period I might believe it, but product quality doesn’t end with the lease or first owner trade, its for the life of the product.

          also on recalls:
          https://www.thetruthaboutcars.com/2014/04/new-or-used-more-troubles-with-old-gm/#comment-3066529

          • 0 avatar
            jmo

            So, your theory is that a new car (say a Civic) has say 1/5 as many unscheduled repair stops from 0-5 years 0 – 60k miles but the number of repair visits increases dramatically over say 150k miles vs. a 1994 Civic?

          • 0 avatar
            28-Cars-Later

            Yes that’s my general frame of mind. If people assume the product’s life cycle is 20year/200K, I am interested more in the whole picture vs the initial warranty period. The last batch of 10-15yo product was a vast improvement over its 90s predecessors in terms of TCO inc overall longevity. I’m a little bearish about the future batch.

      • 0 avatar
        krhodes1

        Recalls are as much about politics as they are about quality. And as platform and parts sharing becomes more widespread, recalls become bigger as the same part is used in more vehicles. And ultimately, I don’t care about recalls because they don’t cost me anything.

        On average, cars are FAR more reliable than they have ever been. Some are far, far, far better, some are not quite as good, but the average is way, way, way up.

        Heck, my 2013 Fiat, long the butt of so many jokes, has had ZERO, zip, nada, none, no issues in its first year. Not a single one. Can’t say that about any other car I have ever owned, new or used.

        • 0 avatar
          28-Cars-Later

          Um no car since the mass adoption of fuel injection should have an issue in its first year. I realize this was not always the case even as recently as the early 90s, but its pretty much been the case since then excluding outliers.

    • 0 avatar
      CoreyDL

      Same time as alchemy.

  • avatar
    jim brewer

    I long for the good old days where the manufacturers leased their luxury cars hopeful that they could sell the returned cars as used cars for high prices. At the five year mark, values totally plunged. At six years they were being given away.

  • avatar
    dal20402

    The more off-lease buyers the better. An influx of off-lease cars would help bring used car values back to sanity. Sanity = when the new car is NOT financially more attractive than a late-model used car, as a few new cars have been over the last two or three years.

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