Resale values of three-year-old off-lease vehicles are beating expectations for the first time since 1999, according to a report in Automotive News March 28.
Higher-than-anticipated residual values mean manufacturers won't lose as much money when they resell off-lease vehicles. The higher values also encourage automakers to offer lower monthly lease payments on new vehicles.
This will not lead to a dramatic upswing in leases, the report said.
Automotive Lease Guide (ALG) of Santa Barbara, Calif., has revised its residual value projection for 2002-model vehicles coming off lease this year. Those vehicles are expected to retain 45.9 percent of their sticker prices. That is 2.4 percentage points higher than Automotive Lease Guide projected when the vehicles were new. Many lenders base their monthly lease payments on its estimates.
Raj Sundaram, president of ALG, told Automotive News that a reduced supply of off-lease vehicles, rising interest rates and more efficient methods of remarketing used vehicles at the wholesale and retail levels have helped strengthen used-vehicle prices.
Sundaram said used-vehicle values will probably start to fall again in late 2007 and into 2008. Increases in leasing and the possibility of low-priced imported vehicles from China likely will hurt used-vehicle resale values three years from now.