Automaker's US Financial Services - Margins Increasingly under Pressure
Used Car Price Decline Likely to Accelerate in 2017
In the US, data from auto auction house Manheim shows that used car prices dropped in November, which is the first YoY decline since April. Used car prices fell 0.3% YoY and 1% MoM as rising incentives for new cars required a quick price adjustment to used cars in order to keep demand for them healthy.
Competition from cheaper new cars is not the only issue for the second-hand car market:
While the expected 3.1mil off-lease vehicles hitting the market this year could still be absorbed without much pressure on prices, next year’s 3.6mil, and 2018’s 4mil off-lease vehicles, are likely to result in further significant price declines in the used car market. This could spell bad news for automakers’ financial services divisions:
Lower used car prices require them to make higher provisions, in order to account for lower residual prices of leased vehicles.
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