COLORADO SPRINGS, Colo. - The boom in new-truck sales could result in a used-vehicle bust in the next three years.
The industry can expect a glut of used light trucks - especially sport-utilities - from 1997 to 1999, said Scott Zucco, vice president of Lee and Mason of Maryland Inc., a residual insurance company in Baltimore.
The supply of 3- to 5-year-old vehicles is expected to reach 45 million in three years, including a record 19 million light trucks, said Zucco, a speaker at last month's National Vehicle Leasing Association convention here. The industry sold 2 million sport-utilities in 1996 alone. 'I do not know if there's enough demand to handle the influx,' he said.
Here are some danger signs:
1. The number of off-lease vehicles is expected to skyrocket because of shorter lease terms. 'In 1995, less than 18 percent of our portfolio was in 24- and 36-month leases. Looking ahead, in 1997 over 50 percent of the scheduled terminations will be 24- and 36-month leases, increasing to nearly two-thirds (66 percent) in 1998,' said Zucco.
2. Average wholesale values for sport-utilities are declining. They dropped about 5 percent in 1995. Incentives on new sport-utilities hurt resale values on comparable used-vehicle models, said Zucco.
3. Leasing companies are filing more claims for residual value insurance, which means they are losing money disposing of off-lease vehicles. The vehicles fail to fetch residual value.