ORLANDO, Fla. -

In looking at business cycles of the past, Tom Webb noticed that each time new-vehicle sales rose coming out of a recovery, franchised dealers often lost focus on the used-car side of the business.

But not this time around, said Manheim’s chief economist, noting the improvements in the dealer body.

“Each that time that lost focus was less than the time before as they became better operators. And I would suggest to you in this current recovery, they have not lost focus (on used cars) at all,” Webb said during Manheim’s press conference Saturday at the NADA Convention & Expo.

Just talk to the dealers on the showroom floor, he suggested.

“If you ask them what the most important function their new-vehicle department played for them last year, many are going to tell you, ‘it supplied me with used vehicles,’” he said.

3-Year Look at Off-Lease Volume

Speaking of supply, Webb also touched on a crucial valve in the used-car supply chain during his presentation: off-lease volume.

He was discussing this trend and other key areas of the used-vehicle industry in his overview of Manheim’s 2013 Used Car Market Report, which was released Saturday morning at the convention.

Webb expects off-lease will grow this year and eventually pass 2.4 million units in 2015.

Back in the early part of this new century, off-lease volumes hit a record mark of just under 3.5 million units in 2002, according to the Manheim report. Then came the drop-off in recent years.

But after plummeting to 1.5 million units in 2012, expectations are that off-lease volumes will end a three-year decline and move upward this year, followed by steeper growth in following years.

“The fall-off in originations was more dramatic than the fall-off in new-vehicle sales,” Webb said at Manheim’s press conference Saturday at NADA.

In fact, new lease originations dropped from a level well above 2.5 million units in 2007 to a level just above 1 million in 2009, according to Manheim Consulting’s data.

“Since that time, they’ve gone up faster than new-vehicle sales,” Webb said. “And the important thing here again, this is leasing done right. This was not leasing done to get a monthly payment to someone with less than perfect credit.”

Instead, he said, leasing has been geared toward the more ideal target.

Banks Names 5 Factors Helping Trade-in Values Remain High this Year

Also taking center stage during press conferences on Saturday were used-car prices. With a decline of less than 1 percent expected this year, NADA Used Car Guide’s Jonathan Banks outlined why exactly he believes used prices will stay at lofty levels.  

He boiled it down to five key factors, as listed below in a statement from NADA:

  • Fed policy and a highly competitive lending environment will continue to see credit standards loosen and availability grows.
  • The recovery in housing and construction will pick up steam, benefitting both the economy and employment. This will help stoke demand for traditional used-car and -truck shoppers.
  • Employment will continue to improve, especially toward the latter half of the year once the outcomes of the government sequester and debt ceiling extension are better known.
  • With a predicted increase of 8 percent, the supply of units up to three years in age will grow for the first time since 2006, but even with the increase, volume will still be 25 percent below where it was in the three years leading up to 2009.
  • While it’s expected that the recovery in new-vehicle sales will siphon off a portion of used-vehicle demand, there remains pent-up demand for those consumers who traditionally purchase only used vehicles.

“As job growth continues to progressively improve, used-vehicle intenders will gradually replace their current vehicles with newer, pre-owned ones, thereby helping to compensate for the loss of new-vehicle substitute demand,” Banks said.

Overall, used prices up to eight years old, collectively will have an average price of $14,375 in 2013, compared to $14,500 in 2012.

The first half of 2013 is expected to show prices decreasing compared to the year-ago period, NADA said. This will be driven by consumer and business reaction to the 2-percent payroll tax holiday expiring as well as  “political activity surrounding the deferred federal budget sequester and the debt ceiling extension.”

Banks added: “Excluding last December’s inflated showing from Hurricane Sandy, used prices in the second half of the year should essentially match what was observed in 2012.”