Used-vehicle prices are slumping in the United States, just as cars and trucks coming off lease are crowding the upscale pre-owned market.
That's bad news for several luxury import brands and their captive finance companies, which rely heavily on leasing. Their used vehicles now are selling, in some cases, for thousands of dollars less than the automakers expected.
Last week, BMW AG said it had taken a $372 million charge to reflect falling U.S. resale prices. The company reported a first-quarter pretax profit of about $844 million, down 24.8 percent from the year-ago quarter.
BMW CEO Norbert Reithofer said the company's income from sales of end-of-lease vehicles in the United States was substantially less than anticipated.
“The resale conditions of cars after the leasing period have worsened,” Reithofer said during an earnings conference call. “The fact that a large number of leasing contracts ended in the first quarter of 2008 compounded the situation.”
Jan Ehlen, a spokesman for BMW North America LLC, said the number of BMW vehicles that came off lease between September 2007 and March 2008 rose 50 percent from the year-ago period. Ehlen declined to say how many off-lease vehicles BMW expects to send to the U.S. used-car market this year.
Sales volume isn't BMW's problem. The company sold 34,461 certified used vehicles in the first four months of 2008 — 30.7 percent more than in the same period of 2007.