Used-Car Market: Brands to Watch in 2014



CARY, N.C. - 

To gauge which brands will stand out in respect to used sales this year, analysts are taking a look at expected lease maturities as a predictor.

In this case, a brand to keep an eye on in 2014 might be Cadillac.

Joe Spina, the director of used-car analysis at Edmunds.com, explained that during the first six months of 2011, Cadillac touted higher lease penetration than in the previous two years. Since the majority of these leases were 36-month terms, according to Spina, many of these units will be reaching maturity this year.

“This really is a great opportunity for these customers to experience the fine new products Cadillac has to offer when they return their matured lease car. It is a win for the dealer because they have an opportunity to sell a new Caddy,” Spina added.

But that’s not the only luxury brand expected to see big sales lift in used this year.

In fact, Kelley Blue Book is predicting the entire luxury segment will see pre-owned sales expand in 2014.

“We believe to see strong growth in the luxury segment, namely BMW and Mercedes-Benz, to name a few.  This will be primarily driven by an increase in off-lease volume which should improve supply and drive sales for these brands,” explained Alec Gutierrez, senior analyst at KBB.

Though expanded off-lease supply is a boon to most automakers, too much of a good thing could still cause problems for manufacturers.

Honda leased beyond the 30-percent penetration rate during the first few months of 2011, according to Edmunds.com data, which may provide more off-lease vehicles than franchised dealers can sell this year, Spina warned.

“Fortunately for Honda, these vehicles are among the best in retained value. Even if there are more cars than franchise dealers can absorb, plenty of other dealers will be happy to buy them at auction,” Spina noted, stressing that retention rates may save the brand from any trouble high lease penetration rates could bring.

Lastly, Hyundai will be another one to watch. Though their leasing levels were not very high in 2011, Spina noted,  it was still quite a bit higher than in the past for the brand — a result of better products and higher residuals.

“Lease penetration (for Hyundai) is currently much higher than Ford, Chevy and Toyota and similar to Honda and Nissan. With their terrific products and ability to lease, Hyundai certainly has assembled a top-notch remarketing team to continue this line of business,” Spina said.

And of course, the models that have seen new sales surge in the past few years may see these units come back in as trades, perhaps ramping up used sales this year.

“Those brands that have enjoyed above average new sales growth over the past few years should see used sales improve due to greater supply availability. These include Kia, Hyundai, VW, Audi, Subaru and Buick,” said Larry Dixon, senior manager, market intelligence at NADA Used Car Guide.

On the other hand, brands including Mitsubishi and Scion, with lower late-model supply, may have a more difficult time growing used sales.

Overall, models producing the most off-lease inventory in 2014 are expected to see the biggest boosts in used sales.

“Models with high levels of lease or fleet returns should similarly see stronger used-vehicle sales. The expectation is that these vehicles will be discounted at a greater rate than less leased or fleeted vehicles, creating an attractive price point for payment conscience shoppers,” said Juan Flores, the director of operations for the Trade-In Marketplace at AutoTrader.com.
 

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