What’s Behind Toyota’s Leasing Drive? CPO Sales?

by Jon LeSage, remar­ket­ing edi­tor at Auto­mo­tive Digest

Here’s my take on a trend that’s affect­ing used vehi­cle val­ues and vol­umes as off-lease units start pick­ing up sig­nif­i­cant­ly. Per­haps CPO sales will cush­ion the blow?

Toy­ota is leas­ing a lot of cars, espe­cial­ly Cam­rys, as it works hard to secure that top spot for best-sell­ing car in Amer­i­ca.

Leas­ing has grown in num­bers late­ly, with Toy­ota tak­ing a lead role along with Hon­da and Hyundai.

Toy­ota Finan­cial Ser­vices now offers more leas­es and loans than any oth­er automak­er in this mar­ket – it has $95B in assets and han­dles more of its affil­i­at­ed deal­ers’ fund­ing trans­ac­tions in the US than any oth­er automak­ers’ cap­tive lender or whol­ly owned finance arm.

Low-cost leas­es helps Toy­ota draw both younger and low­er-income cus­tomers, and hav­ing such a strong cap­tive part­ner allows Toy­ota to be more aggres­sive on leas­ing, said Lar­ry Dominique, pres­i­dent of ALG.

US auto leas­ing is at its high­est lev­el in at least a decade and has been count­ing on strong used car prices and low inter­est rates.

Remar­ket­ing experts have been say­ing for a while that off-lease units are going to be increas­ing quite a bit soon and will play a key role in soft­en­ing prices; and inter­est rates are expect­ed to go up as the econ­o­my strength­ens.

As Auto­mo­tive Digest Pub­lish­er Chuck Park­er has writ­ten recent­ly in his blog, it’s a bit of a mys­tery as to how automak­ers, cap­tive finance arms, and deal­er net­works can put out a lot of leas­es with­out los­ing mon­ey on resid­ual val­ues if they’ve been over-inflat­ed.

I would make the case that Toy­ota and its com­peti­tors are count­ing on cer­ti­fied pre-owned vehi­cle sales to soft­en the blow if leas­ing trans­ac­tions start los­ing mon­ey.

CPO sales are doing very well in bring­ing in a lot more dol­lars than non-CPO sales for the same used mod­el. Most of CPOs are com­ing from off-lease units.

CPO has been tak­ing off in vol­ume month-over-month – and Toy­ota is sell­ing more CPO units than any oth­er automak­er, includ­ing Gen­er­al Motors.

Toy­ota sold 311,354 cer­ti­fied units year-to-date, up 13.4% over the same time peri­od in 2012. Lexus has sold 60,706 units this year.

The clos­est automak­er is GM, which has sold 288,769 for the year count­ing Buick, Chevro­let, GMC, Pon­ti­ac, and Sat­urn brands; and 15,275 Cadil­lacs.

As of Octo­ber 31, Hon­da had sold 209,176 CPO units for the year, Ford had sold 190,012, Chrysler Group 101,902, Nis­san sold 95,856, Mer­cedes-Benz 80,425, and BMW 68,861 units.

Hon­da is also leas­ing a lot of cars, too, and may be pro­tect­ing its resid­u­als with CPOs, like Toy­ota.

So, I would make the case that CPOs could play an asset-pro­tec­tion role in the indus­try.

Sources:
Bloomberg

Auto­mo­tive Digestibles

Auto Remar­ket­ing

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