Record Lease Returns Mean Car Bargains for Buyers

A record number of vehicles coming off leases this year could mean bargains for some buyers--especially those who like small cars and big sport-utility vehicles.

Analysts expect 3 million leased cars and light trucks--the most so far--to return to the market in 1998, up 3% from last year and a 50% increase from 1995.

Experts say the large number of leased vehicles being returned to dealers, combined with factors such as stagnant new-car prices and overheated retail competition, will help keep used-car prices down.

“If you ever wanted to get the car of your dreams, this is the time for it,” said Rich Spitzer, an analyst at Polk Co. in Detroit.

Art Spinella, an analyst at CNW Marketing/Research, said certain used models will especially feel price pressure.

The number of sport-utility vehicles coming off leases will increase 10% from last year, which could make those vehicles a bargain, he said.

Similarly, the number of off-lease small cars will grow 10%, and the number of specialty cars, such as the Jaguar XJS, will increase by 75%.

But Spinella said the number of luxury cars being returned to dealers will shrink by 18% from last year, which means used models in that segment could rise in price.

The increasing number of vehicles being returned to dealers reflects the exploding popularity of leasing in the mid-1990s, when the number of drivers leasing vehicles doubled from 1992.

“It’s very good news for consumers,” said Mike Robinet, an analyst with CSM Forecasting. “It gives you a much better selection of used vehicles.”

Used-vehicle prices, as measured by the consumer price index, fell last year for the first time since 1990. Tim LaFleur, an analyst at the Bureau of Labor Statistics, said the drop is in part because of the glut of leased vehicles being returned to dealers.

But used-vehicle prices, as measured by the National Automobile Dealers Assn., grew 2.6% last year.

Tom Webb, senior economist for the association, said the increase was misleading. It didn’t reflect the higher quality of vehicles being sold or the larger proportion of more expensive sport-utility vehicles being sold.

Dealers’ profit per used vehicle fell 30% last year--from $250 to $175--in part because they didn’t take into account the lower market value of used cars, Webb said.

He said used-car prices should remain flat this year.

Spinella said the glut of vehicles coming off leases this year will mostly hurt sales of cars more than 5 years old.