Get ready for a flood of off-lease cars

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NEW ORLEANS -- New vehicles retailed through leases nearly tripled to 3.2 million vehicles in 2013 compared with 2009, making it imperative that the industry hone remarketing processes to handle the increased off-lease vehicle volume expected over the next couple of years, says an annual report on the used-car industry.

The 2014 Manheim Used Car Report also warns that dealers who accept off-lease vehicles on behalf of lessors -- so-called grounding dealers -- "will not be willing or able to acquire the same large share of off-lease units that they have in recent years."

The report was released by Manheim, a used-vehicle auction company, at the NADA convention Saturday.

Unlike in 2002, when high volumes of off-lease vehicles returned to the market and dragged down residual values, off-lease vehicles this year will enter a more favorable market in which used-vehicle prices are still relatively high and "residual adjustments" likely will be modest, the report says.

Additionally, in 2002 the certified-used market was less than 40 percent the size of total off-lease volume.

"In 2013, the CPO market was 23 percent bigger than total off-lease volume," the report says. The implication: today's CPO market can absorb a much larger portion of off-lease vehicles.

Still, this year and, more importantly, into 2015 and 2016, lessors need to improve their remarketing processes and make sure off-lease units are exposed to all potential buyers, the report adds.

New-vehicle sales to rental companies increased 1 percent to almost 1.6 million units in 2013, the report says, citing rental unit sales data from Bobit Business Media. It was the highest volume since 2007 but well below the 2.1 million units that were sold to rental fleets in 2005 and 2006.

Together, the Detroit 3 accounted for almost 65 percent of the new vehicles sold to rental fleets in 2013, having decreased their share for the third year in a row, the report says.

At the same time, Hyundai's sales into rental rose 73 percent to 118,000 units, accounting for the biggest percentage increase among automakers last year.

You can reach Arlena Sawyers at asawyers@crain.com.


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