Off-Lease Vehicles Are Flooding Lots, so Where's the Drop in Used Car Prices?
One- to three-year-old-vehicles are pouring back onto dealer lots, but the predicted drop in used vehicle prices hasn’t happened yet.
Consumer choices (meaning: trucks, trucks, trucks) and the high value of returning vehicles are keeping used prices near record levels, but analysts still expect a drop later this year, Automotive News reports.
The Manheim Used Vehicle Value Index rose for the fourth straight month in July, coming to within a half point from its highest level ever, recorded in 2011.
The reasons for this are many. Trucks and SUVs depreciate less than sedans, and this has pushed overall used vehicle prices higher. The relative health of the U.S. economy and the industry’s updated used vehicle selling practices also helped lower used vehicle depreciation.
Eventually, the tide has to turn, and forecasters expect the growing glut of off-lease vehicles to help it. 3.1 million off-lease vehicles will hit the market in 2016, up from 2.3 million last year. That number is expected to rise to 3.8 million by 2018.
Jonathan Banks, executive analyst at NADA Used Car Guide, told Automotive News that dealers “look at what will the market bear, and they price accordingly.” He expects a decline in used vehicle prices later this year.
Flattening new vehicle sales, as well as boosted incentives on new cars, should help the overall used vehicle market decline in value. The overall drop won’t be huge — current predictions point to a decline of five percent or less. That’s already happened in some segments, with subcompact vehicle recording a 20 percent drop in resale value since the start of the year.
[Image: Faris/ Flickr]
Used car prices are in bubble territory. The problem with bubbles is that they always last longer and rise higher than expected. But they always pop, and when they do the prices always return to pre-bubble levels.
Still waiting on prices of old junk to come down...the T-Bird isn't long for this world with its ever-increasing oil consumption but my car budget's tighter than ever. Yet I go on Craigslist and everything for $1000 or less is stuff I'd be insane to buy, like super ratty Maximas and half-dead Corollas.
"...the industry’s updated used vehicle selling practices also helped lower used vehicle depreciation..." What does this mean?
When these lease vehicles hit the Car Yards it will slow the US new vehicle market quite a bit. I'd say it will impact new vehicle manufacture. I wonder if some creative finance companies will find a way to keep the current "owners" of lease vehicles from walking away?