Off-lease vehicles, a critical source of product flowing into the used market, has plummeted, according to DesRosiers Automotive Consultants.
In its latest automotive industry update, DAC said the supply of off-lease vehicles into the used vehicle channels is a function of three variables: “overall sales in previous years, lease penetration at the time, and the degree that the leased vehicle may be bought out by the original consumer at lease maturity.”
They said back pre-pandemic times, in 2019, new light vehicle sales were strong and lease rates were high (above 35%). This resulted in a strong flow of off-lease product that peaked in 2022. However, a range of issues occurred during the pandemic, from semi-conductor shortages to a steep decline in new light vehicle sales, and a decrease in lease penetration to just above 20%.
The impact of these issues is now visible, several years later, in the off-lease used vehicle pipeline. DAC said the supply of lease maturities is expected to continue to decline through to 2027. Furthermore, the rate of vehicle buy-out by the original consumer remains well above pre-pandemic levels.
“Until 2027, the Canadian used vehicle market will contend with a constrained supply of younger used vehicles, impacting the average age of vehicles changing hands and setting a pricing floor for younger used product,” said Andrew King, Managing Partner at DAC, in a statement.
