2 trends to watch: Off-lease volume & rental sales

CARY, N.C. - 

Beyond a slew of uncertainties at play, another reason analysts are “hedging our bets” when forecasting the 2017 new-car market and opting instead for a range: off-lease volume, says Autotrader senior analyst Michelle Krebs.

According to forecasts from Cox Automotive chief economist Tom Webb, off-lease volume could reach 3.6 million units in 2017 and then approach 4 million next year.

“There is going to be a tremendous amount of off-lease vehicles coming back into the market,” Krebs said in a conference call with the media on Wednesday. “And the interplay between those what we call nearly new cars, certified pre-owned cars against new cars is going to be something to watch.

“It’s great for consumers. Except they will have to do a little more homework in looking at, ‘do I buy a nearly new or do I buy new?’ But how that plays out is something that we’re going to pay a lot of attention to this year,” she said.

Leading the "unknowns" potentially impacting the new-car market, Krebs said, are the policies the new presidential administration could implement. Things like border taxes, an infrastructure package, changes to the tax structure and regulatory movements all could impact car sales, she said. 

Managing rental fleet 

The overall impact of off-lease volume certainly has colored how automakers have managed leasing programs in recent years. The same could be said for sales into rental fleets.

Kelley Blue Book senior analyst Alec Gutierrez said during the call that automakers have become “quite a bit smarter” when it comes to the strategy around selling new cars into rental.

“They’ve cut volume in a number of ways to manage the amount of units they’re going to have coming back to auction in the next 12 to 18 months, similar to the way they’re having to deploy their lease strategy,” he said. “And two, they’ve also been, I think, a lot smarter in terms of making sure that the units sold into rental are more representative of the average car sold to a retail consumer so that when those come back, you don’t have a bunch of cars with crank windows and with no options dragging down your residuals, which are going to make it more costly to lease in the future.” 

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