Amid the growing popularity of SUVs, an influx of off-lease vehicles returning to the market could impair residual values, David Paris, supervisor of market intelligence at JD Power, told Auto Finance News. So far this year, off-lease volume has increased 7.7% year over year, according to JD Power data.
“We’re anticipating used supply to peak this year, up by 3% compared to ,” Paris said, adding that 70% of new vehicles being sold and leased are SUVs. “It’s going to level off over the next two years into 2020 and 2021.”
“Even more of those [vehicles] are coming back into the market,” he said. “It’s definitely applying downward pressure on used residual values and retention values.”
However, strong demand for SUVs helps bolster used-vehicle prices, Paris said. In fact, mainstream wholesale volume for compact SUVs increased 16.8% year over year, according to JD Power data.
“We were expecting the used market to start slowing this year and into next year and the following year, as well,” Paris said. “However, used vehicles are continuing to get more expensive, and we’re seeing this shift. Consumers aren’t able to get these newer vehicles at prices they were in the previous years, which is pushing them over to the used side of the market.”