“Those who cannot remember the past are condemned to repeat it,” wrote the philosopher George Santayana. This quote rings true in vehicle remarketing trends that are currently percolating in the wholesale market.

Many of the dynamics in today’s market are eerily familiar to the resale value softness that occurred in the last decade, which ultimately peaked in 2002. At that time, year-over-year increases of off-lease vehicles entering the wholesale market exerted downward pressure on resale prices.

A Leasing Resurgence

Today, retail leasing is in the midst of a dramatic resurgence. Lease originations have grown significantly, from only 1.1 million units in 2009 to nearly 3.2 million in 2013. Manheim Consulting projects 2.1 million off-lease units will enter the market in 2014, which will grow to 2.5 million in 2015 and 3 million in 2016.

Fueling this growth are some OEMs offering aggressive lease incentives, such as inflated residual values, lower lease calculation rates, the absorption of negative equity in the lease calculation and lower qualifications for credit approval.

Although much of the forthcoming growth in wholesale inventory will be due to higher off-lease volumes, there will also be growth in the number of rental, repossessions and dealer trade-in units.

As wholesale inventory swells, it will produce downward pressure on wholesale pricing, since a corresponding increase in dealer demand isn’t anticipated.

As Tom Webb, Manheim’s chief economist, points out, 2016 is shaping up to be a challenging year for remarketers. In fact, there is no guarantee the 2016 market will be a straight-line progression from today’s robust market.

As history shows, we operate in a cyclical industry influenced by macro-events that are often beyond our control.

The Challenge of 2016

While 2016 may seem far off, this is the wholesale market in which many fleet managers will be remarketing today’s 2013 and 2014 model vehicles. Many variables in the 2016 market are already baked into the forecasts, but many unpredictable variables exist that may mitigate these downward pricing pressures.

Some remarketing experts downplay concerns that used-vehicle pricing may be heading for a pricing correction with the spike in the availability of used vehicles.

They argue that used-vehicle supplies will continue to remain below historic levels, and with the improving economy, pent-up demand among consumers to replace aging vehicles will drive strong demand for both new and used vehicles.

There also has been a surge in the export of used vehicles to emerging international markets, which will increase buyer demand for this expanded inventory.

Similarly, many off-lease vehicles are cherry-picked by OEMs for their certified pre-owned programs.

In 2002, according to NADA, the certified-used vehicle market was less than 40% the size of total off-lease volume; however, in 2013, the CPO market was 23% bigger than total off-lease volume. The argument is that today’s CPO market can absorb a much larger portion of off-lease vehicles than in the past.

Very few doubt the ability of the wholesale market to absorb the increased volume of off-lease vehicles. The question is how much adjustment will remarketers need to make to prices in order to facilitate these wholesale transactions?

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A Multi-Pronged Strategy

Today, used-vehicle resale values continue to remain strong as dealer demand scoops up existing wholesale inventory of good-quality used vehicles.

It is important to remember that the higher-than-normal resale values we have experienced in recent years are an anomaly caused by the low used-vehicle inventory in the wholesale market, resulting from the extremely low sales of new vehicles during the 2009-2011 time frame.

This will soon change as trend lines point to a multi-year swelling of used-vehicle inventory in the wholesale market. The forthcoming off-lease volume is not a secret ­— the remarketing industry knows it’s coming.

What are you doing to prepare for these different market dynamics? Fleet consignors must optimize remarketing processes to ensure out-of-service fleet units are exposed to the most potential buyers.

This requires a multi-pronged remarketing strategy to reinvigorate employee sales, promote sales to grounding dealers, aggressively using upstream online remarketing channels, and implement greater creativity in remarketing units at physical auctions in order to stand out from the crowd.

Mike Antich is the editor and associate publisher of Automotive Fleet Magazine.