Inventory of used vehicles is expected to get a big boost soon, with up to half a million units coming off lease. Edmunds reports the surge in inventory from the leasing market will be short-lived and feature more EVs and hybrids.
Zooming in: The leasing market began recovering from the post-pandemic plunge in 2023, with lease penetration jumping from 18% in 2022 (2 million units) to 21% (2.59 million units).
A year later, leasing peaked at 23%, with 2.99 million vehicles.
But now, the leasing market has started to pull back again. In 2025, leasing penetration fell to 20%, and through Q1 of 2026, it has remained at 20%.
Still feeling the effects: Edmunds Director of Insights Ivan Drury told CDG the drop in leasing is still from the new car shortages after the pandemic.
“During that period, manufacturer‑sponsored lease programs became less compelling, and strong demand meant dealers could sell vehicles at MSRP or higher without relying on incentives,” Drury said.
“As a result, many lessees chose to extend their leases or buy out their vehicles rather than return them. Today, we are seeing the impact of those decisions in lower lease turnover and slower replacement cycles. In addition, while leasing still offers a path to a lower monthly payment, higher money factors have made it look less attractive relative to traditional financing for many consumers.”
Drops in value: A short-term impact of the increase in inventory that Edmunds noted was a drop in the three-year residual value of vehicles to 66%.
That is a drop-off of 15% since Q1 of 2022, when the residual value for three-year-olds was 81%.
Even at 66%, the average transaction price is $31,548.
According to Drury, those values will not fall much further.
“Lease returns are expected to increase through 2027, which could put further downward pressure on residual values, but a sharp collapse is unlikely because volumes should remain broadly in line with market demand,” Drury said. “At the same time, downward pressure from new‑vehicle incentives is being tempered by more disciplined inventory management, even in an environment of slower‑than‑expected sales.”
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Change in models available: In this short period of increased inventory, dealers should expect an increase in the percentage of EVs and hybrids available.
Due to the $7,500 Clean Vehicle credits available, 12.4% of the leases in 2023 were EVs or plug-in hybrids.
Edmunds points out that some of the electric models had lease penetration rates between 77% and 87% in 2023. Many of the models are now hitting the off-lease market in droves, creating “rapid depreciation.”
The Mercedes-Benz EQE, EQS and EQS SUV all were selling in 2026 Q1 for between $10,000 and $16,000 below their estimated resale value.
The Volvo C40 Recharge and Mercedes-Benz EQE SUV, which had lease penetrations of 87%, were selling for $7,160 and $8,563 below their estimated resale prices.
Finding value: Though many of the high lease penetration models are seeing losses, some of the largest volumes of off-lease models in 2026 are selling for above their estimated resale values, including Honda’s CR-V ($5,372), Civic ($5,545), and HR-V ($4,851). Ford F-150s, which had only a 9% lease rate, are selling for $3,111 above their value off-lease.
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