ATLANTA -

Manheim chief economist Tom Webb dissected the short- and long-term impact of rising off-lease volume when he conducted his first quarterly conference call on Wednesday morning.

Webb highlighted the positive prospects including the swell of potential certified pre-owned vehicles for franchised stores as well as how the entire industry is in much better position to handle a half-million units or more as leases written three years ago begin to terminate.

“Although there is a lot of talk about the destruction of wholesale pricing because of these off-lease volumes, let’s not diminish the benefits,” Webb said. “I’m sure there are a lot of franchise dealers out there that are salivating about the opportunity to have good quality used-vehicle inventory literally driven to their door.

“It’s a very promising situation for the franchise dealers, which is also always good for us,” he continued.

The CPO market already is beginning the year with plenty of momentum. According to a preliminary report from Autodata Corp., full-year certified pre-owned sales figures for 2013 came to a total of 2.11 million units.

The best annual results in CPO history, this marked the first time the industry has ever sold 2 million or more certified vehicles in a year, Autodata said.

Fittingly, the year closed with the best December ever, as dealers posted 171,280 CPO sales. This was a 9.4-percent year-over-year increase, the firm’s report indicated.

Webb pointed to the fact that the CPO market is flourishing as one of a handful of factors as to why the projected surge in off-lease vehicles passing through auctions likely will play out better than the last time the industry saw such a situation back in 2002.

Webb compared the two timeframes when asked by Auto Remarketing during Wednesday’s call.

“In terms of the lessors themselves, the differences in simple terms are night and day,” Webb said. “In 2002, in terms of those off-lease units, to a large extent the certified pre-owned programs were not nearly as developed or actually non-existent at that time to handle those units. The leasing itself, a lot of it was not captive lessors. It was banks who may have a different perception in terms of protecting residual values.

“Certainly the upstream sales mechanisms, the carrots and sticks which the captive lessors have provided to their franchise dealers to buy into term units is substantially different then,” he continued.

“The biggest factor, and hopefully this factor will still hold, is that the units coming back in 2002 represented leases written in 1999 where the contract residual was heavily subvented and quite frankly, the benchmark residuals where they started from were incorrect,” Webb went on to say. “They were overly high so vehicles were coming back with residual percentages nowhere near what the market values were.”

With those elements in play, Webb doesn’t suspect wholesale prices will fall through a trap door and tumble dramatically more than the 1.9-percent year-over-year decline Manheim spotted for December.

“Now when we get out to 2016, it might be a little bit more of a challenge, but we have a long time to prepare for that challenge. And we should prepare for it because we know it is coming,” Webb said.

Later in the call, Webb was asked to clarify how the industry can prepare to stabilize prices so both wholesalers and dealers can benefit from the expanding pool of vehicles that can possibly be certified and sold for stronger margins.

“Since in reality a very large share of the lease market is controlled by captive lessors, then they are in reality in control of new-vehicle pricing and what happens in 2016,” Webb said.

“For example in 2016, if you have a large amount of off-lease units coming back which you think are in poor residual shape, you have to counter balance that with what your new vehicles sales marketing is,” he continued.

“Certainly you’re going to compound the problem dramatically if in fact in 2016 you’re also trying to push the new-vehicle market with subvented, new-vehicle lease deals. It’s just going to hurt your residuals that much more,” Webb went on to say.

“I think the key is you always talk about that inter-relationship between the remarketing side and the origination side. You can’t have them working at cross-purposes,” he added.