SANTA MONICA, Calif. -

A central theme to a special edition of the Used Vehicle Market Report from Edmunds.com released today   — and the 2016 used-car market, in general — is the heavy amount of cars coming out of leases.

There are several tentacles to this off-lease surge. For one, it represents a steady stream of vehicles ideal for certified pre-owned — an area of the market (along with used-car values) that Edmunds is projecting to have “yet another record year.”

It’s also leading to a younger used-vehicle fleet.

Edmunds said in its report that more than half (55 percent) of dealership used sales last year were for cars ages 3 and under, with signs pointing to that percentage climbing this year.

Driven by off-lease volume, the average age of a used vehicle sold by a dealership dipped from 4.6 years in 2014 (and in both of the two years prior) to 4.4 years in 2015, Edmunds said.

The boom in off-lease cars hitting dealer lots, Edmunds said, “was noticeable last year and now will be even more pronounced since 27.1 percent more cars were sold via three-year leases in 2013 compared with 2012.”

Auto Remarketing caught up with Edmunds’ Ivan Drury, who shared his thoughts on the flood of leases coming back into the market and its impact on the age of used cars that dealers are selling.

When it comes to pricing of these cars, this can be a double-edged sword, he said.

Younger vehicles typically means higher prices. However, he explained, a lot of the lease returns are coming from segments like the compact car, midsize car and subcompact car. This can push overall used pricing down due to the fact that these are usually lower-priced segments.

Edmunds’ report shares more on the segmentation of lease returns. It points about that two-thirds of off-lease volume will likely come from just five segments. Here’s how segments ranked in terms of the most popular leases of 2013:

1. Midsize cars

2. Compact cars

3. Compact crossover SUV

4. Entry-luxury cars

5. Midsize crossover SUV

One interesting nugget to take away from this is that the midsize car, compact car and entry-luxury car are among the “less popular” categories today. And they’re coupled in the top five with the “very desirable” compact crossover SUVs and midsize crossover SUVs, Edmunds said.

The company also notes in the report: “For all of 2016, fuel costs have been projected to remain stable around the current low level.  This will give consumers who are on the fence about buying a truck or SUV further reason to purchase in these segments, fueling demand and increasing values.”

Touching on the off-lease/CPO connection, Edmunds points out that these cars typically have a listing price about $1,500 higher than a non-CPO used car.

“The high volume of CPOs in the market mix is helping to boost the industry average used-car transaction price,” the report notes.

Stronger economy’s impact on vehicle age

Today’s economy is largely stronger than, say, six or seven years ago when the recession and auto downturn was still being felt. .

So, we asked Drury to what degree he believes a more positive trending economy is having on vehicle age. He estimated the average trade-in age to be about 6, noting that some consumers are still waiting it out to trade their cars in. However, the off-lease push greatly counteracts that.

“We do see that there are enough off-lease vehicles to offset those really old trade-ins,” Drury said.

“Remember back in 2009, 2010, the sales for new cars were so low that there’s that dearth; there’s that huge dip in what’s even available from then. So, if you look at that average trade-in age, even though it says roughly 6 years, you’re also seeing stuff that’s 10 years old, 9 years old that’s being traded in, still, for a new,” Drury said. “And that average really is, it’s like a dip in between these two humps of really near-new … and then you’ve got the really old. But it’s still enough so that these off-lease are pulling into this younger category.”

Term lengths: threshold or sweet spot?

On the new-car side, Edmunds is seeing folks stretch payments out, Drury said, which reflects the common monthly-payment mentality of car shopping. He expects to see the same in used, particularly due to the amount of off-lease cars coming back.

With many of those ending up as CPO — again, a pricier option that non-certified used — “term lengths either have to go up or they’re just going to have to start denying people, and I think they’ll definitely choose the longer term lengths over saying, ‘you can’t buy this car,’” Drury said.

Average used-car transaction prices were at $18,552 in 2015, an all-time high, Edmunds said. With off-lease units often representing future CPO sales and pricier segments (trucks, SUVs) catching consumers’ eyes, look for that average to remain lofty, Edmunds said.  As Drury alluded to above, that should drive longer loan term lengths. Edmunds said in its report that less than $400 per month is typically the range used-car buyers go for.

In 2015, the average term on a used-car loan was 66.2 months, according to Edmunds. The data in the report’s chart — which goes back to 2010 — shows a consistent rise over those six years.

“Used-car bargain hunters may benefit from another market trend: much near-new inventory is coming from car rental agencies whose vehicles are generally in service for a year or two and then dropped back into the marketplace,” Edmunds said in the analysis.

There were roughly 2 million vehicles purchased by rental agencies last year, up from approximately 1.8 million bought in each of the three years prior, according to Edmunds.

Lease rankings

The segment rankings discussed earlier are based on leasing volume, not penetration (the latter of which you might expect to lean more towards luxury vehicles).

“It’s amazing, though, how big the volume has become over time.  That growth … it’s exploding everywhere,” Drury said. “And it’s across the board too.  If you look at it from, even the (penetration) rate, every category has gone up.”

That includes large trucks, which typically would be expected to be a finance deal or for fleets/businesses.

Sharing more thoughts on the increasing lease penetration, Drury said: “We keep thinking, ‘OK, well, it might taper off,’ but at the same time, I feel like the consumer preference and it makes it so easy, especially for people who are uncertain about what the future holds or even what brand, I would say that leasing’s always the best way to test the waters because, hey, you don’t like it, you’re sending it back.”

And in 2016, they'll be doing so in droves.