Shocker: 45% Of Premium-Brand "Buyers" Actually Lease
Polk’s Tom Libby takes a penetrating look into the obvious and reveals that American luxury car buyers rarely actually buy their cars, reporting:
Industry-wide, leases comprise about a fifth of all new vehicle registrations, but within the luxury market, lease penetration is more than twice as high at 45%. Three premium makes: BMW, Infiniti and Mercedes-Benz, actually have national lease rates at or above 50%…
These extraordinarily high lease results lead to several conclusions. First, the price of the vehicle is not the be-all and end-all. Rather, the monthly lease payment is a crucial factor. The monthly payment is not completely linked to the price, as the OEM and dealer have several tools by which to manipulate the monthly payment; these include, among other things, artificially raising the forecasted residual amount and increasing/decreasing the up-front lease payment. Second, if your premium make is not in the leasing business, you need to get there right away. Lastly, your lease rates, residuals and drive-away costs need to be competitive.
While there’s a lesson about America’s ceaseless desire to live beyond its means in there somewhere, the real lesson here is this: with sales coming out tomorrow, be sure to remember that not all of them are actual sales. Also, this is the reason you never see those “Don’t Laugh, It’s Paid Off” stickers anymore…
Whenever i see someone in a $50K+ car i assume its leased and that their business is covering the cost. But here's the question from someone clearly outside of this system - are corporate types being given a car allowance (or using their business to buy the lease) and then on top of that getting a tax break for leasing the car? Maybe the most relevant question is, what percentage of that lease payment comes out the driver's pocket in real money? My sense is that it must be not much.
Leases make it easy to charge your company for the ride and get the tax bennies. (Which really says the normal taxpayers subsidize it). The other point is that luxury cars aren't really acquired for their mechanical function, they are obtained for the effect they have on others. As such, they must be new. A guy driving a 1-3 yo S class comes across as rich; a guy in a 10 year old one comes across as a pretender.
Sure people are living beyond their means, or simply do not care about that eternal monthly car payment. The dumbest thing I ever did was buy a brand new 2007 G35X. My wife and I both make decent money, so I figured why not buy a "luxury" car. It didn't run right, Nissan didn't care, and I took a $10,000 bath on the trade in when I got out of it. If you drive your cars into the ground - buy used and run it till the wheels fall off. If you want a new car every 2-3 years, why not lease? Let the manufacturer worry about residuals and maintenance. Buying a new luxury car outright is just plain stupid. -ted
It comes down to people wanting to know the actual cost, and the convenience of not having to buy and sell cars. This IS the reason the Germans get away with such horrid quality and such expensive repairs. The people who lease these cars don't pay for the repairs so, as long as they aren't inconvenienced to badly (they get loaners) they don't care. They do make a mental note NOT to buy though.