Interested by an almost new vehicle ?
Leasing a vehicle has become a trend again over these last few years, mainly due to low interest rates. It represents, for the automotive industry, almost one out of every three transaction. While for other car manufacturers, especially in the luxury vehicle category, such as BMW and Mercedes it represents more than 50%.
Generally speaking, the lease on a rental will last about three years. After which time, the customer will return to the dealership for a new vehicle.
This is where things might get complicated for the industry. Because of the very high number of leases over recent years, the experts at companies such as Ford and GM have let it be known that the number of lease returns would reach unprecedented heights in the industry. In the United States, forecasters report that one million more vehicles than last year will return to the market after the end of a rental lease.
This additional volume will put downward pressure on the prices of used cars, especially recent models. If the cars depreciate too quickly, consumers will not be willing to pay high prices for new vehicles. High residual values also contribute to maintaining low monthly rental payments. In other words, if the prices of used cars fall, the whole system will collapse.
Carmakers' profits will fall and car financing companies (which often belong to manufacturers) may have to account for depreciation on the value of their leased assets.
During the 2008 recession, fewer people purchased new cars, which meant that there weren’t as many used cars for sale in the years that followed. This helped maintain relatively high prices, but there are signs that lead us to believe that the wind is likely to turn.
It is the merciless law of the market that will apply. When supply is greater than demand, prices will decline. Many predict that supply, in some market segments, will be very high.
So keep your eyes opened, there will most likely be great bargains waiting on the recent used car market.
*Taken from L’Annuel de l’auto d’occasion 2017