One of the critical sources of product flowing into the used market are off-lease vehicles. The supply of these vehicles into the used vehicle channels is a function of 3 variables – overall sales in previous years, lease penetration at the time, and then the degree that the leased vehicle may be bought out by the original consumer at lease maturity.
New light vehicle sales peaked in 2017 and held strong until 2019 with high lease rates above 35% leading to a strong flow of off-lease product that peaked in 2022. However, with the pandemic and then the semi-conductor related shortages, new light vehicle sales crashed and lease penetration decreased dramatically to just above 20%. Now, several years later, we are seeing the impact in the off-lease used vehicle pipeline. The supply of lease maturities is expected to continue to shrink through to 2027, and in addition, the rate of vehicle buy-out by the original consumer remains well above pre-pandemic levels. Andrew King, Managing Partner at DAC noted that “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.”
Off-lease supply is just one of a multitude of factors that impact the Canadian used vehicle market. DAC prepares an annual in-depth report on the used vehicle market that offers an analysis on market dynamics, as well as sales volumes by channel, age group, select brands, regions, and more alongside a 5-year sales forecast.
DesRosiers Automotive Consultants Inc. (2024, October 16). Off-Lease Supply of Vehicles Plummets.