There are a few different ways to look at the increase in off-lease volumes expected to hit the wholesale market in 2015 and in years to come. One, of course, is the macro numbers.

In a recent Perspective report, NADA Used Car Guide predicts this year will show another 20-percent rise in off-lease volumes, which are likely to come in at 2.35 million for 2015. NADA UCG is predicting that off-lease volumes will climb more than 67 percent between 2014 and 2017.

“The 25-percent lease penetration that we had this year (2014) — which represents about 3.2 million vehicles — that translates into record off-lease volumes coming back to the market in 2017,” NADA Used Car Guide’s Jonathan Banks said during a press conference at the NADA Convention & Expo.

Another way to consider off-lease supply is to examine the micro numbers, so to speak, particularly those shared by Auction Broadcasting Co. and its seven locations — each of which have undergone expansion and renovation in the past year.

Here’s a by-the-numbers rundown of how off-lease volumes have impacted the strategy of just one auction company, via ABC president Jason Hockett:

• ABC St. Louis, whose property is connected to Union Pacific Rail, added more than 20 acres of storage and doubled its body shop and reconditioning capacity. The auction also debuted a drive-through photo imaging center that Hockett said can take nine photos on more than 70 cars in an hour
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•  The company put in 10 additional acres of storage, a four-bay mechanical shop and a new reconditioning center at ABC Baton Rouge.
   
• ABC Birmingham was expanded by 18 acres, upping its storage capacity to 55 acres. The auction also pushed its lane count from six to eight, while also adding new reconditioning, mechanical and body shop facilities.
   
• The company added a test track to its ABC Cincinnati facility. Interestingly enough, that auction also bought an adjacent dealership, then converted it to a recon and mechanical shop.
   
• The company continues to make progress on its 18-acre expansion and recon center renovations at ABC Detroit/ Toledo. Hockett said the growth would bump parking space up to 58 acres. Additionally, they plan to open a new photo imaging center by the end of April to help accommodate all the extra off-lease cars.
   
•  ABC Lancaster Pennsylvania now has 60 acres of capacity thanks to the paving of an additional 9.5 acres. ABC bought a neighboring property, then flipped it into a new mechanical and inspection facility.
   
• The company completely renovated the office and arena at ABC Bowling Green Kentucky.

“In anticipation of the off lease volumes, ABC hopes to offer their clients a seamless and simple solution by offering marshalling, professional imaging, reconditioning, multi-platform upstream listings, and the proven success of selling in the live environment with the assistance of Edge Simulcast,” Hockett said.

Hockett’s peers in the industry have taken a similar proactive approach to expectations for a bump in volume.

Manheim North America president Janet Barnard said her company’s auctions have been preparing for the volume surge the past three years, and has made it a priority to help facilitate greater speed when it comes to buying and selling these off-lease cars.

“The thing that we’re focused on and a big part of our dealer focus is making all of those transactions happen more quickly,” Barnard said during a NADA Convention & Expo press conference. “For the past decade, these cars have sat on lots and collected dust, sometimes for weeks and/or months at a time. And no one can afford that anymore. And there’s demand.”

Over at ADESA, speaking in terms of lane capacity and labor force, chief executive officer and president Stephane St-Hilaire outlined how his company has prepared.

“We’ve seen it coming. We’re definitely ready; there’s no doubt about it,” he said. “We right-sized on the downturn a few years ago, but we maintained that capacity to increase at auction, both in terms of number of lanes, labor force and every step of the way, from consigning vehicles and completing a detailed condition report, according to the standards of the industry, all the way to moving vehicles around the lot.

“So, we have the capability to turn on the tap, so to speak, and face that from a storage standpoint, as well,” he added.

Bob McConkey, a partner in the McConkey Auction Group, also shared his group’s preparation.

“We never really downsized dramatically during the downturn in volume. We felt it was a cycle and that the volumes would rebound. We diversified our facilities; we engaged in retail reconditioning work maintaining our employee base and expertise,” McConkey said. “We are well-positioned for the off-lease volumes as well as the uptick in dealer consignment.

Further Impact of Supply

Hockett also touched on the role supply (the lack thereof and an impending increase) plays in channel selection, be it online or in-lane.

First, he started with the soft used supply in the past five years.

“As lease vehicles were being turned in to the dealerships. The dealerships were purchasing a large portion of them because the residuals were often times less than wholesale market. It was supply and demand,” Hockett said.

“Now that we are going to see a substantial increase in used volume, I believe that the wholesale market will be less than the residual values. If this is the case, the dealerships will pass on purchasing lease units at time of turn in and wait for them to sell in the auction environment,” he continued.

“As for how dealers will buy and sell inventory, they won’t have to buy vehicles 300 to 500 miles away. The dealers will have plenty of supply in their existing markets, which will reduce or eliminate additional transportation costs,” Hockett added. “Also, by purchasing vehicles in their local market, it will reduce the headaches and risk of buying a vehicle that wasn’t described accurately.

“We all look at vehicles differently, regardless of the algorithm to come up with a grading scale. The ‘human factor’ will always be there. New- and used-car dealers are some of the best business people you will ever encounter,” he continued. “Due to vehicle shortages, dealers learned to optimize their turn times by sourcing the ‘right vehicles’ for their places of business. I don’t expect that to change as volumes increase.”

Staff Writers Sarah Rubenoff and Nick Zulovich contributed to this report.