LAWRENCEVILLE, Ga.—The rising price of new and used cars, as well as the fast-growing appeal of leasing, is generating momentum for the leasing of used vehicles, reports Black Book.
“As auto lease levels continue to reach new highs, auto lenders will continue to ponder the prospects of re-leasing some of the off-lease inventory expected back in the next few years,” Black Book said.
Black Book said that lenders will need to develop new skills in identifying which vehicles will make good candidates for a used-lease program. To help banks and credit unions, the company has introduced a white paper, “How To Grow A Profitable Used Leasing Portfolio,” which is available here.
The paper addresses fluctuating residual forecasts across all segments and how it’s imperative that lenders rely on collateral data to identify the right vehicles for a used-lease portfolio.
The white paper offers specific data examples that address certain scenarios:
- Where used leasing would not make sense: A comparison of a new vehicle finance environment against the same vehicle after 36 months; with data showing how the monthly payments offered would not differ greatly based on a number of criteria.
- Where used leasing would make sense: A similar comparison of a new vehicle with its counterpart at 36 months of age; this time factors such as mileage and a residual without subvention show where the monthly payment would show a noticeable difference.
- How to leverage residual data to find used lease candidates: An explanation into residual forecasting and depreciation trends that can lead to the identification of optimal used lease opportunities based on collateral insight.
“As the off-lease inventory of three- and four-year-old vehicles continues to increase this year and over the next few years, lenders, dealers and remarketers will need to find alternative channels to return these vehicles out into the market,” said Anil Goyal, senior vice president of automotive valuation and analytics for Black Book. “Used leasing may be the right choice for some of these vehicles, but the wrong decision can be detrimental to the profit margins of a portfolio, which is why collateral data can mitigate any vehicle profit risk.”