CARY, N.C. -

If recent predictions from Edmunds.com come to fruition, the number of lease terms coming to an end next year will eclipse 2.5 million units, which would be an increase of 484,000 units from 2012.

In other words, look for a big jump in the amount of lease returns flowing into the used-car market next year.

And this expected uptick in off-lease volume looks like it may help supply in the auction lane. In fact, the National Auto Auction Association forecasted in a recent Auction Industry Report that a projected turnaround in fleet/lease consignment numbers — as well as manufacturer/factory consignment numbers — will lead to a “noticeable overall gain” in auction volume for 2013.

In an interview with Auto Remarketing at the NAAA Conference in early October, Manheim Pennsylvania vice president and general manager Tim Van Dam echoed that sentiment.

He is expecting a big gain in volumes at his location, particularly on the fleet/lease side of the equation.

Van Dam noted that across the industry, some of the auction’s commercial accounts will likely double in remarketing volume in 2013 and most will “grow dramatically.”

Van Dam added: “Those types of vehicles coming back in will really drive the market, a. And rental car fleets are also growing.”

At Manheim Pennsylvania alone, total volumes (including all segments) are expected to climb by 30,000 units in 2013, Van Dam said.

Offering the perspective of a consignor, Bob Graham —– the vice president of vehicle remarketing at ARI — said his company is expecting a significant uptick in vehicles remarketed this year and next.

“ARI has seen a dramatic increase of about 25 percent over last year, and 2012 will be a record year for the volume of vehicles we remarket,” Graham said. “We expect 2013 to be equally as strong with an additional 5-percent to 10-percent increase.”

2012 Consignment Behavior

As far as how the different consignment avenues have trended in 2012, NAAA said that in the first half of the year, dealer consignment numbers jumped 7.2 percent year-over-year, fleet/lease sales fell 8.2 percent and OEM/factory sales dipped 7.8 percent.

The aforementioned declines for fleet/lease and OEM/factory sales, however, are much less steep than the respective 23.1-percent and 25.2-percent drop-offs for these segments for full-year 2011.

“This year, as the negative impact of weak new sales in 2008 and 2009 on current FL-MF (fleet/lease and manufacturer/factory) auction volume lessens, total volume is expected to increase during the second half,” explained NAAA economist Ira Silver in the August report that examined the first half of the year.

Sharing some more recent findings, Van Dam told Auto Remarketing in early October that he had noticed an increase in the rental fleet at his auction, which is fairly typical for this time of year.

However, he said, “it’s a little bit more balanced than in years past,” pointing out that instead of a late-August flood of rental fleet vehicles, there has been a steady influx.

Continuing on, Van Dam said that dealer consignment “has been strong for us all year,” and that by the eend of the year, he hopes to be up about 10,000 dealer cars sold compared to 2011. On the factory side, Van Dam expects this to increase next year, but this year the numbers have been down.

“I think that’s kind of to be expected,” he explained. “Some of their lease portfolios didn’t get put into the service in 2009 or 2008, and now they’re coming back in.”

The analysis from Edmunds predicts less than 2 million lease terminations for full-year 2012, continuing a streak of declining numbers of leases coming to term. However, the more than 2.5 million lease terminations projected for 2013 would the highest number since 2010.

Pricing Trends & More

When it comes to pricing in these segments, recent analyses diagramed some of the trends spotted during the third quarter. First, a report on wholesale prices from ADESA’s Tom Kontos broke down July and August numbers.

Prices in manufacturer consigment droped 1.7 percent sequentially in July, then followed that up with a 4.4-percent decline in August. However, in the latter month, prices were still 2.8 percent ahead of August 2011.

“The increasing rate of month-over-month decline may have been a precursor of continued downward price pressure on manufacturers’ vehicles in anticipation of more off-rental (program) vehicles entering the market after Labor Day,” Kontos said.

“The increasing rate of month-over-month decline may be an indication of continued downward price pressure on manufacturers’ vehicles as more off-rental vehicles began entering the market after Labor Day,” he continued.

(In fact, Kontos’ analysis on September trends — released less than a week after the July/August analysis — indicates that OEM consignment prices dropped  6.6 percent month-over-month in September while falling 0.9 percent year-over-year, “indicating downward price pressure on manufacturers’ vehicles as more off-rental vehicles began entering the market after Labor Day.”)

Turning to the fleet/lease side of the market, Kontos found that these consignors saw their prices drop 1.3 percent month-over-month in July but only 0.6-percent in August. This led to a 1.9-percent year-over-year decline in August.

Kontos added: “Dealer consignors saw a 3.5-percent average price decrease versus June and a 1.4-percent decrease versus July, resulting in prices being down 4.8-percent versus August 2011.”

Meanwhile, in his report on September wholesale values, Manheim chief economist Tom Webb took a special look at off-rental pricing, which continued at high levels.

“The average auction price for rental risk units sold at auction rose in September versus August and a year ago,” Webb said. “Volume for the month and average mileage were less than last year.”

During his quarterly conference call in early October, Webb would add: “The off-rental prices, basically you look at it as a straight average, have been at a record high and continue to go up.

“Even when you make all of the adjustments, they are close to a record high,” he noted. “The movement from there obviously would be some sort of downward pressure just because of the market.”

Webb also touched on his expectations for off-lease volume during the call.

“I believe the growth in off-lease volumes is more of a 2014 event than a 2013 event,” he said.

“Since the leases coming off in 2013 will have contract residuals in tune with market values, we can expect that the return rate will remain relatively low,” he continued. “Needless to say with all things being equal, a high return rate will have a bigger impact on wholesale values.

“Certainly particular makes and models that did subvent their leases and pushed them out too heavily will have a problem when they come back,” Webb added. “But for the market as a whole, that is not the case.”

Consignor Best Practices

Beyond sharing some consignment data with Auto Remarketing, ARI’s Graham also offered a few points on challenges and best practices from his perspective as a remarketer.

He emphasized the importanance of improving inspections and making them more consistent, while also stressing tailoring pictures for online buyers.

“Also standardizing the arbitration rules and expectations between in-lane and online buyers is a challenge,” Graham said.

“We are working through the IARA to provide our feedback and best practices to the NAAA and keep an open dialogue with auction chains and independents,” he continued.

When asked what today’s buying dealer demands in the wholesale lane, and how his company will respond  as a consignor, Graham said transparency and consistency are at the top of the list.

“They need us to announce vehicles properly and then treat them fairly both in-lane and online if they have a legitimate issue.

“They also want us to run vehicles consistently and sell when the vehicle is on the money,” he added. “Being a good seller through understanding that the buyer is critical to our success and meeting their needs is the core to building the ARI brand and selling more vehicles.”

Editor's Note: This article is part of our special section covering fleet, leasing and retal trends in the Nov. 1–14 print edition of Auto Remarketing. More coverage on those sectors of the auto market can be found in that issue.