300,000 More Off-​Lease Vehicles Slated to Return to Market in 2018

BY Courtney Huckabay
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Many dealers are betting on a strong economy and strong used-​car sales this year, and some are even adding stores or refurbishing or replacing existing ones. Here are trends worth tracking in 2018, and why, according to industry watchers who monitor the retail used-​vehicle market.

The inventory story

"It’s been said before, but we’ll say it again: A lot of off-​lease cars and trucks are slated to return to the market in 2018. How many?" Ariena Sawyers writes in Auto Remarketing.

About 300,000 more than returned in 2017, bringing the total to 3.9 million units, Cox Automotive predicts.

This could be music to Used Car/​Truck Shoppers' ears. The new AudienceSCAN study found 17% of Americans intend to purchased used vehicles this year.

"That’s good news for dealers, especially independent dealers who may not have had many opportunities to buy late-​model used vehicles, said Tom Kontos, chief economist at KAR Auction Services Inc."

"He predicts that the additional used-​vehicle volume in the marketplace will lower prices by 2 percent to 3 percent in 2018."

Since there is so much inventory that the grounding and non-​grounding (like-​brand franchise) dealers will take a pass on buying, it gives independents room at the table,” Kontos said.

Dealers can promote their off-​lease offerings with radio (over-​the-​air, online, mobile or tablet) spots. The latest AudienceSCAN study found 27% of used vehicle shoppers took action after hearing radio commercial in the past month.

"But independent dealers who are looking for 5- to 8‑year-​old vehicles, the bread and butter of many used-​car lots, might be disappointed, said Patrick Brennan, senior vice president, Industry Solutions Marketplace at Cox Automotive."

"Those vehicles are scarcer because fewer were sold as new during the recession and in the years immediately afterwards."

So that’s challenging when they look for cars,” Brennan added.

"Todd Caputo decided his used-​vehicle inventory this year would include more small SUVs and crossovers, such as the Chevy Trax, Equinox and Terrain and fewer sedans, such as the Cruze, Malibu and Impala."

"He said he’s been pretty successful finding those trucks in the past, but with so many more coming off-​lease and incentives from the manufacturer to buy them, the prices have already dropped about 10 percent compared to early 2017. And he believes prices will fall even more."

There are literally thousands of them coming off lease, and the prices are going to go down,” said Caputo. “They (the manufacturers) know there is a tidal wave coming, and they are trying to dispose of them as quickly as possible.”

Using some pre-​roll to feature off-​lease inventory could sway shoppers. The most recent AudienceSCAN survey reported 26% of Used Car/​Truck Shoppers took action after watching pre-​roll video ads (the video that plays before the video you want to watch) in the past month.

Weaker profits?

"Dale Pollak, founder of vAuto, said a troubling trend for dealers is that used-​vehicle sales are strong, but profits are “uncharacteristically” weak because of margin compression."

"Dealers can buffer margin compression by selling more used vehicles, more quickly and redirecting more of their promotional and advertising dollars to the Internet where 90 percent of used-​vehicle buyers shop for vehicles, Pollak said."

AudienceSCAN data is available for your applications and dashboards through the SalesFuel API. Media companies and agencies can access AudienceSCAN data through the AudienceSCAN Reports in AdMall.