RVI Risk Outlook — June 2015

Chang­ing dynam­ics in the US econ­o­my and in the new vehi­cle mar­ket will have an impact on resid­ual val­ues. A com­bi­na­tion of stronger sales and greater leas­ing activ­i­ty will cre­ate a greater sup­ply of used vehi­cles in the mar­ket. The increased used vehi­cle sup­ply, cou­pled with high­er incen­tives, will lead to a soft­en­ing of resid­ual val­ues. Used vehi­cle prices are expect­ed to fall by 8.0% from cur­rent lev­els by 2018.

The lease pen­e­tra­tion rate for the first quar­ter of 2015 was 20.3% of total sales. Lease pen­e­tra­tion has not been above 20% since 2000. We expect the growth in leas­ing to con­tin­ue over the next sev­er­al years which will con­tribute to a grow­ing sup­ply of off-leased vehi­cles.

We expect the sup­ply of used vehi­cles in the mar­ket to increase through­out our fore­cast. In addi­tion, we expect an increase in the incen­tives offered on new vehi­cles. By 2018, we expect used vehi­cle prices (real) to drop 8.0% from today’s lev­els.

The used sup­ply of com­pact cars will con­tin­ue to increase through May 2017 before lev­el­ing off. This will con­tribute to a decline in com­pact car prices. By 2018, used prices in the seg­ment are expect­ed to drop 5.7% below cur­rent lev­els.

Over the next 5 years, RVI expects a soft­en­ing in used vehi­cle prices in Cana­da as the sup­ply of used vehi­cles is expect­ed to increase through 2019. By 2018, we expect our used vehi­cle price index to fall by 2.8% from cur­rent lev­els

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