Lease & Fleet Supply Trends Push Can. Residuals Higher
In what is described as a "hot" used-vehicle market, Canadian residual values have been on the upswing the past few years, thanks in part to what happened in the leasing and fleet sales markets, according to a DesRosiers Automotive Consultants analysis.
Examining data from Canadian Black Book, DAC pointed out that the residuals of three-year-old passenger cars in Canada were at 49 percent in 2010 before improving to 50.8 percent last year and hitting 54.6 percent this year.
As for light trucks, after falling below 35 percent in 2009, 36-month residuals for these vehicles surged to 48.2 percent in 2010, then steadily ticking upward to 50.6 percent this year.
"Used vehicles are hot, and the market seems willing to tolerate higher prices," firm president Dennis DesRosiers said in the analysis. "These improvements in residual values speak, in part, to past trends in the leasing and fleet sales markets.
"In the case of the former, Canadians were forced to modify their purchasing habits during last decade's recessionary years as vehicle manufacturers pulled back their leasing programs," he continued.
This led to lease penetration plummeting to 7.1 percent in 2009 after having been at 42.4 percent just two years earlier, he added.
As such, supplies have diminished.
"The supply of off-lease and off-fleet used vehicles — particularly in popular segments such as compact passenger car and intermediate sport utility — has diminished considerably; wholesalers and resellers are facing a relative supply desert, and the prices charged for the vehicles trickling through the off-lease tap reflect this shortage," DesRosiers noted.
"Some of the lack of supply has been made up by high levels of imports of used vehicles from the U.S., but the pricing of younger used vehicles in Canada remains robust, at least for now," he continued. "Dynamics in other segments of the used-vehicle market vary considerably, however, reflecting the complex nature of this important market."
By Auto Remarketing Staff