2017 is shaping up to be an excellent year to purchase a used car. That’s great news for consumers — but a big worry for auto manufacturers, rental companies and auto finance groups.
A pile-up of nearly new cars returning off lease is set to cause trouble for the U.S. car industry.
Thanks in part to low interest rates, leasing has become an increasingly popular way to drive away a new car. It accounts for almost a third of all new car transactions in the U.S. and it’s also huge in the U.K. For BMW and Mercedes-Benz in particular, it’s been a boon for sales.
Typically a lease lasts about three years, after which the customer returns to the showroom for another vehicle — which is when things could get difficult for the industry.
“There’s going to be a lot of units coming back over the next several years,” Ford Motor Co. warned last month. “They’re going to get to levels that we have never seen on an absolute basis in the industry before“.
In 2017, about one million more off-lease vehicles will be available in the U.S. compared with 2015. That additional volume will put downward pressure on used car prices.
This post was published at bloomberg