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Log In / Register | May 24, 2018

Vehicles Coming Off Lease Could Cause New Sales Tumble, Analyst Says

Climbing vehicle and light truck lease returns, which are projected to reach record numbers, could send American new-vehicle sales in a downward spiral, says an auto industry analyst.

An incoming "tsunami" of returning off-lease vehicles could send U.S. new-vehicle sales tumbling as low as 13 million by 2021, according to one Wall Street analyst.

John Murphy, an analyst at Bank of America Merrill Lynch, said weaker new-vehicle demand so far this year could spell trouble for the industry moving forward. That's because the market might not prove to be large enough to absorb roughly 3.5 million off-lease vehicles set to return to dealership lots this year.

Murphy said his new-vehicle sales forecasts of 17.9 million in 2017 and 18 million for 2018 could prove to be too optimistic, given that the industry is on pace to generate sales of 17.1 million units this year, down from a record 17.5 million in 2016. That could prove problematic, since the industry needs to sell at least 17.5 million new vehicles this year to absorb the off-lease vehicles and prevent a significant decline in used-vehicle pricing. — John Irwin, Automotive News

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