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Jonathan Smoke speaks on off-lease

Smoke: Off-lease peak now likely to happen in 2019

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Article Highlights

  1. Lease returns have been one of the dominant discussion points in the auto industry over the last few years, and rightfully so, given the influx in volumes that are now approaching a peak.
  2. “The end result is that wholesale volumes will be flat this year, and when viewed by channel, digital is growing and upstream channels are growing, but physical auctions will be down,” Cox Automotive chief economist Jonathan Smoke said. “Therefore, for many dealers — especially independent — wholesale supply is indeed down.”
  3. What Manheim calls “digital offsite dealer sales,” or sales that happen beyond the physical auction, were up 32.6 percent year-over-year in the first half. “We are feeling bullish as we see an increase in cross-channel buying and selling, the cornerstone of the Manheim Marketplace,” Derek Hansen, Manheim’s vice president of Offsite Solutions, said in a news release. “The success we’ve seen so far this year fuels our desire to continue enhancing the digital experience and building trust with our buyers and sellers.”

Lease returns have been one of the dominant discussion points in the auto industry over the last few years, and rightfully so, given the influx in volumes that are now approaching a peak.

But when you think about lease returns and their impact to wholesale markets, only a “subset” of the off-lease volume ends up reaching the auction lanes, Cox Automotive chief economist Jonathan Smoke said in a conference call with analysts and reporters earlier this month.

Many cars coming out of leases end up being bought by the lessee or kept by the grounding dealer.

“In fact, the grounding rate goes up as the desirability and equity position of the vehicle improves. Our analysis confirms that the mix of vehicles is improving,” Smoke said. “One-third of this year’s maturities are crossovers. All of the growth in maturities is coming in SUVs and pickups. And we’re seeing improving equity position, as well.

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