Used Car Prices Fall as Off-Lease Inventories Rise

On July 1, 2009 the federal government launched its Car Allowance Rebate System, or “cash for clunkers” as it was more widely known, to provide economic incentives for U.S. consumers to purchase new, more fuel efficient vehicles.  The program led to the scrapping of millions of older-model vehicles, and resulted in a supply vs. demand situation that sent used car prices spiraling upward.

Today, dealers across the country have an excess of used vehicles that are going for increasingly lower prices. The number of off-lease vehicles for sale could reach 2.5 million in 2015, up from just 1.5 million in 2012. Wholesale auto auction company Manheim predicts that number will reach 3 million in 2016, and remain there for the foreseeable future.

As a result, predicted used car prices would decline by 2% this year. According to Sr. Consumer Advice Editor Philip Reed, “Many car shoppers might not realize how much the new- and used-car markets feed off each other. The boom in new car leases, for example, is leading to a higher number of lease returns, which adds to the growing inventory of used cars, forcing their prices down.”

In a recent interview, Nissan North America Senior Vice President for U.S. sales, parts and service Fred Diaz said, “There is a tsunami of lease returns coming to us, and we have to be really, really well prepared for them.  We’re in the process of fine-tuning and putting the final touches on what that strategy will be with our dealer advisory board.”

Nissan is not alone.  Volkswagen of America General Manager of Used Vehicle Operations Scott Weitzman says, “We’ve got more [off-lease] vehicles coming back into the network in the second half of this year than the network has ever seen before.”

The situation is something of a double-edged sword for consumers.  Lower used car prices mean more car for the money when purchasing, but less cash in your pocket when selling or trading in your old vehicle to purchase a new one.

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