Growing Leasing Market to Ramp up New Sales in 2013 & Push Used Prices Down
As 2012 closed with leasing levels not seen since before the recession, many wonder how this trend will affect both uses and new sales for 2013. In fact, according to the 2012 Manheim Used Car Report, the number of new-vehicle leases written in 2012 increased to 2.5 million, up from 2.1 million in 2011 and 1.1 million in the “trough year” of 2009.
With the leasing market growing once again, Kelley Blue Book contends this trend will boost new-vehicle sales as well as provide more lease returns to shore up used supply for dealers in the future.
In the past few years, lease returns have been few. And KBB said the “reduced” lease returns also have limited the number of consumers that traditionally would be seeking a new vehicle at the end of their lease term.
“The reduced lease returns also have limited the number of consumers that traditionally would be seeking a new vehicle at the end of their lease term. While this reduced the number of in-market shoppers in recent years, Kelley Blue Book anticipates this trend to begin to reverse in 2013,” the company explained.
In fact, KBB expects that the return in leasing will bring as many as 300,000 additional in-market shoppers to dealers’ lots this year. The company also thinks this number will continue to increase into 2014 and beyond.
And lease returns from the market bounce back in 2010 may help the used inventory situation, as well. Leasing ramped up again in 2010, increasing nearly 700,000 units year-over-year, KBB shared.
That said, leasing growth may cause used-vehicle values to soften, KBB cautioned.
As lease returns dried up in the years following the recession, used supply took a hit, pushing pre-owned prices up significantly.
Now, dealers may be reaping the rewards of 2010 lease returns, which may in turn push prices down to more normal levels.
“At this point, we are expecting modest softening in 2013, so the impact should be relatively mild overall. If anything, we could see demand for used cars increase as the gap between new- and used-vehicle pricing grows, thus making a used vehicle a more attractive alternative to a new car," Alec Gutierrez, senior market analyst of automotive insights for Kelley Blue Book’s KBB.com, told Auto Remarketing.
And when asked if incoming 2010 lease returns would help drive used sales, though the change may be slight, Gutierrez says there is room for growth.
“The incremental increase in lease returns from 2010 will definitely help to drive used sales, at least to some degree. Of those with a lease reaching its end this year, some will choose to keep the vehicle, some will buy or lease a new vehicle, while still others will opt to buy a used car," said. Gutierrez. "We believe that most consumers will likely either keep their vehicle or buy new; however, we do expect to see at least some additional used-vehicle demand created by the influx in lease returns."
In fact, over at Honda, the company is expecting lease maturities to increase by “sizeable” numbers for both the Honda and Acura brands. And this will help foster growth in the certified pre-owned department, said Brian Butts, who heads up CPO for Honda and Acura.
“With a sizeable increase in lease maturities in 2013 for both brands, we are poised to move the needle even further,” Butts said.