LAS VEGAS -- Fewer off-lease vehicles will flow back into the market in 2004, but that doesn't mean prices for used vehicles will see much improvement.
Continued pressure on new-car prices means used prices will be stable at best this year, according to Atlanta-based Manheim Auctions Inc.'s "The Used Car Market Report."
Automakers relied heavily on sales to rental car fleets in 2003 to help prop up volume. But that hurt prices for pre-owned vehicles as rental cars returned to the market faster than usual, according to the report.
Manheim was scheduled to release the analysis on Saturday, Jan. 31, at the National Automobile Dealers convention here. The annual report looks at the wholesale and retail used-vehicle industry.
The number of vehicles coming off lease declined by 149,000 units last year to 3,303,000, down from a peak of 3,452,000 in 2002.
Off-lease volume is expected to fall by another 500,000units in 2004. By 2006, the total will drop to 1,893,000 million units, according to the report.
The decline won't reduce the number of late model, low-mileage vehicles available for manufacturers' certified used-vehicle programs, said Tom Webb, chief economist at Manheim and author of the report. But some of those vehicles will take more effort to find and thus will command higher prices, he said.
"Dealers may be willing to give owners of well-kept, low-mileage, late-model vehicles a little more for their trade ins," Webb says. "By the same token, if you're a remarketer, you're going to get better payback on reconditioning. There is always a keen interest in (retail) ready cars. It will be more so this year."
Used-vehicle prices rebounded in the second half of 2003. Last April, Manheim reported that prices were 11 percent lower than in the year-ago month. But prices were down only 1.3percent at year end.
"The overall economy and retail demand will be good," Webb said. "But compensating for that is the continued pressure of new-vehicle prices. New vehicles are competitively priced, and that has to filter its way down in the used vehicle market."