A burgeoning number of leasers will return their cars over the next six months, and their number is bound to grow even further as leasing continues to be a popular alternative to buying a new car.
Experian Automotive, citing AutoRemarketing.com, says 1.8 million cars will be coming off lease between the end of April and December.
Manheim Consulting, in its 2016 annual used-car report, said the biggest future growth in wholesale supplies will come from off-lease units. In 2015, 47 percent of off-lease vehicles went to auction, while the rest stayed with dealers in the form of trade-ins that were then sold.
Where is this growth in available off-lease cars going to have the most impact? In the certified pre-owned (CPO) market, where it will create a glut of three-year old vehicles that are typically in good shape.
Upward of 25 percent of all used cars that dealers sell (as opposed to private sellers) will be certified pre-owned in 2016. Many of these are vehicles coming off lease, as well as trade-ins and cars from manufacturers.
Models that were popular three years ago continue to perform well in the used-car marketplace today. Customers are going to be trading in leased midsize crossovers like the 2013 Honda Pilot and compact crossovers like the 2013 Chevrolet Equinox. From a price point, these continue to be two of the stronger performers in the marketplace.
But look for a downward creep in pricing for these vehicles among CPO dealers, for a couple reasons. The first is supply and demand: dealers might have more vehicles than they can sell. Plus, as far as new cars go, dealers have been grumbling that manufacturers are making too many of them. New-car sales have been strong for a couple years now – up 68 percent from their low in 2009 – but things seem to be cooling off a bit.
One factor in that cool-off is presidential-election economics, a certain skittishness that creeps into buyers’ minds before a major election. That’s going to be reflected in a slowdown as buyers pause, which dealers will try to combat by offering deals on CPO cars that are still popular. Even with deals, these vehicles can still be profitable for most dealerships.
Here’s another tidbit for you. Wondering where’s the best place to buy a used car coming off lease? Experian provided info on where the top 10 markets will be for the remainder of 2016.
- New York: 307,000
- Los Angeles: 232,000
- Detroit: 157,000
- Miami-Fort Lauderdale: 82,000
- Philadelphia: 65,000
- San Francisco-Oakland-San Jose: 56,000
- Cleveland-Akron-Canton: 46,000
- Boston-Manchester: 42,000
- Chicago: 36,000
- West Palm Beach-Fort Pierce, Fla: 33,000
Live within 100 miles of any of these markets? Pay attention to dealership websites. Normally, when a used-car warranty is involved, the distance between you and the dealership could be a deal-breaker. But CPO used cars come with manufacturer warranties that are transferable to any dealership, something that will minimize your risk.
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