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.