Record leases could squeeze used cars

New-vehicle sales through leases reached their highest level ever, “just shy of 4 million” vehicles, in 2015, according to the Manheim 2016 Used Car Market Report.

In 2015, leases accounted 59.6 percent of BMW’s new-vehicle deliveries and 53.8 percent of Mercedes-Benz’s, the report said, citing J.D. Power and Associates data.

But leasing is no longer just for luxury vehicles. For example, Honda sold 31.6 percent of its sales through leases. Citing data from Experian, the report said the Honda Civic had the highest unit volume of sales through leases.

The report tracks leasing because those vehicles enter the used-car market sooner than vehicles that are sold, due to lengthening new-vehicle loans.

Tom Webb, Cox Automotive chief economist and author of the report, said about 3.1 million off-lease vehicles are expected to return to the market in 2016, up from almost 2.6 million in 2015. That pool of vehicles is expected to grow to almost 3.6 million in 2017 and almost 4 million in 2018.

Those vehicles are expected to put pressure on used-vehicle prices, and it is possible that residual value losses will widen, the report said.

Webb told Automotive News that leasing companies won’t have trouble with residual value losses this year and will “probably be OK” in 2017 and 2018, “if the retail environment remains as favorable as it is right now.”

He added: “But it will be a challenge.”

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