Used Vehicle Values To Decline Up To 8% Over The Next Three Years
This year the 2016 National Vehicle Leasing Association (NVLA) Convention was held at Chateau Elan in Atlanta Georgia. As annually expected there was a great turn out of Independent Lessors from across the US and Canada as well.
In typical fashion the convention’s agenda was well planned with great speakers and pertinent topics, one such important topic was used car values, more specifically the future stability of used car values.
As an independent Lessor that offers Closed End Leases as well as TRAC leases future values are extremely important to my company and our clients. Yet whether you Lease or Purchase your vehicles the future values of vehicles/ residual values is important to everyone for any decline in their value will have a direct effect on the end users overall transportation costs.
In the Wednesday morning session titled “Residual Value Outlook”, three panelists presented their predictions of used vehicle values.
The Panelists were, Josiah Cimino, Manager of the RVI Group, the auto industry’s leading residual value insurance company; Alain Nana-Sinkam, Director of Industry Solutions for ALG, Inc. (Automotive Lease Guide), provider of data-driven solutions for the North American auto and finance industry; Anil Goyal, Vice President of Automotive Valuation and Analytics at Black Book, he is responsible for the editorial and analytic operations at Black Book.
In a nut shell the combined thought of all the panelists was that due to new vehicle sales and more specifically the oversupply of inventory will be the main cause used vehicle values over the next three years. To drill down a little deeper on the topic, with supply / inventory being higher than the demand manufactures will be forced to increase incentives on new vehicles in order to move them, thus deflating the value of the used vehicle values.
The predictions of the panelists is a decrease in values from five (5) percent to eight (8) percent over the next three years, with the panel feeling that 7% on average as being a solid prediction. So as a Lessee that uses Closed End or TRAC Leases to acquire your fleets there will likely be an adjustment in residuals and thus monthly lease payment. The same will hold true if you own your fleet and establish your own projected book values.
If as a Lessee you use Open End Leases to zero or you own and write the vehicles down to zero, you may not have to be concerned about a potential loss when disposing the units but you should budget for lesser gains.
Feel free to reach out to Al Lawrence President at Capital Lease Group to see how our long term approach to developing secondary used vehicle markets providing higher sales figures and can help thoughts hedge against such predictions.
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