Light Vehicle Residual Values Supported by Off-Lease Supply Restrictions
A recovery is well established among residual values of younger used vehicles. DAC analysis of data from Canadian Black Book shows that the residual values of three-year-old used passenger cars have risen steadily in recent years, from 49.0 percent in 2010 to 50.8 percent in 2011 and again to 54.6 percent in 2012. Light trucks have also seen gains, climbing from 48.2 percent in 2010 to 50.6 percent in 2012. Used vehicles are hot and the market seems willing to tolerate higher prices.
These improvements in residual values speak, in part, to past trends in the leasing and fleet sales markets. In the case of the former, Canadians were forced to modify their purchasing habits during last decade’s recessionary years as vehicle manufacturers pulled back their leasing programs. As a result, leasing dropped from a massive 42.4 percent of the total vehicle market in 2007 to just 7.1 percent in 2009. The supply of off-lease and off-fleet used vehicles – particularly in popular segments such as compact passenger car and intermediate sports utility – has diminished considerably; wholesalers and resellers are facing a relative supply desert, and the prices charged for the vehicles trickling through the off-lease tap reflect this shortage.
Some of the lack of supply has been made up by high levels of imports of used vehicles from the U.S., but the pricing of younger used vehicles in Canada remains robust, at least for now. Dynamics in other segments of the used vehicle market vary considerably, however, reflecting the complex nature of this important market.
Read further about used vehicle market trends, and the complicated interactions between the new and used vehicle markets, in our DesRosiers Automotive Reports and AutoWatch newsletters. Contact Albena Saltcheva (905-881-0400 x.18) for pricing and subscription information.
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