CARY, N.C. -

Market conditions in the early days of 2022 aren’t exactly ideal for certified pre-owned vehicle sales.

Off-lease vehicles, a primary source of CPO inventory, are slim pickings, and the combination of high acquisition and certification costs vehicles makes it a pricier option for many dealers.

That’s according to Friday's Data Point report from Cox Automotive, which said certified sales were down close to 17% year-over-year in January and were at their lowest level since April 2020, during the initial onset of the COVID-19 pandemic.

Specifically, Cox’s analysis of Motor Intelligence data indicates there were 166,309 CPO sales last month. That’s down from 186,748 certified sales in December and 181,079 in November, as Cox notes that following a strong second and third quarter, the market has slipped.

The number of lessees deciding to hold on to their vehicles at the end of the lease is at a record high, the company said. That has driven down the supply of CPO-eligible units available to dealers, something Cox addressed in an industry conference call earlier this year.

It said at the time that the number of off-lease vehicles entering the wholesale market is likely to fall from 4.0 million in 2021 to 3.9 million in 2022 and then drop to 3.3 million for 2023. The forecast for 2024 is 3.5 million.

“Off-lease vehicles are normally the largest source of commercial vehicles sold at auction. While the total number of leases scheduled to terminate remain near record highs, the number making their way into auction sales channels are at record lows,” Manheim Consulting vice president Kevin Chartier said during the January call.

“This is due to the incredible surge in resale values and the corresponding increases in the equity positions of the terminating lease vehicles. Normally, 60% or more of the terminating leases find their way into the wholesale used-vehicle market,” Chartier said. “However, with today's tremendous equity position, the vast majority of these vehicles are being purchased at lease termination and prior to entering the wholesale market, leaving less than 15% of the normal volumes heading to the auction in the fourth quarter of the year.”

 And while wholesale vehicle prices have eased and moderated of late, they’re still at historic highs. Combine that with the cost of certifying a vehicle and many dealers are passing, Cox said.

“Used-vehicle demand is strong right now, so many dealers have decided they don’t need to push the CPO program to propel sales,” said Brian Finkelmeyer, senior director of new-car solutions at Cox Automotive, in Friday’s Data Point report.

“Plus, used-vehicle values are sky-high, so there is not a lot of ‘room’ left in the deal. To hold prices down, dealers are foregoing the CPO process.”

Still, Cox is forecasting that 2022 will be a record year for certified, as it projecting 3.0 million CPO sales.

“This forecast is supported by what is expected to be a record tax refund season and the attractiveness of certified pre-owned vehicles to consumers desiring like-new vehicles,” the company said in the report.

This would be the 10th all-time record in the last 12 years.

Cox analysts had said last month that this would likely be the end of the record run for CPO.

Lower supply, particularly for the CPO-friendly off-lease variety means this year is likely the last record year for the market.

“We’re a little bit down on lease maturities. So, there’s enough volume to give us a record in 2022 and that's what we're forecasting,” Cox Automotive chief economist Smoke said during the call. “But it’s probably going to be the last year we can set a record, because the declining lease maturities going forward after 2022 is going to make that much harder to pull off. But we definitely see the demand and the supply there for one more year.”

January can be a tricky month to figure out in automotive, as Smoke discussed in a recent episode of the Auto Remarketing Podcast, which can be found below.