America's Love for Luxury SUVs Is Screwing With Off-lease Sedan Sales
North America’s love affair with SUVs and crossovers arose so suddenly and with such passion that manufacturers were left scrambling to meet demand. Luxury brands certainly aren’t exempt from this but, unlike mainstream marquis, the sudden shift in product demand has thrown those marques a bit of a curveball.
Since prestige brands tend to possess substantially higher leasing rates than their more-affordable contemporaries, luxury automakers are getting stuck with off-lease sedans that nobody seems to want. While that’s terrible news for corporate accountants, it’s good news for anyone looking for a good deal on a used Lexus ES or Audi A4.
“It’s not necessarily the overwhelming amount of vehicles, it’s the mix of those flood of vehicles,” Scott Keogh, president of Audi of America, explained to Bloomberg in a recent interview. “You’re throwing all these cars into the marketplace a couple years after it has evaporated and jumped into SUVs.”
While there are exceptions to the trend (Acura’s RDX, for example) most carmakers have watched crossovers and SUV demand usurp sedan sales. So, when those once-popular four-doors return to dealer lots, fewer people are waiting to scoop them up. SUVs and crossovers now have a majority stake in the luxury market. Three years ago the segment composed 42 percent of the United States’ total volume — now it’s closer to 56 percent.
That leaves a substantial number of off-lease sedans with nobody around to buy them. It’s a sad story but one you can take advantage of. Because, when demand is low, so are prices.
If the crossover craze continues to surge ahead, we might even see artificially suppressed pricing of new cars and bloated SUV price tags soon. Some would argue we already have. Bloomberg notes that Audi’s discounts on car models have risen by about $314 per vehicle this year (to $4,696) while SUV incentives have remained stagnant at $1,986 per unit.
However, Audi is on the low side. Passenger car incentives for Mercedes-Benz, Lexus, and BMW were all significantly higher, with Benz peaking at $6,732 per car sold. Only BMW bothered to shrink incentive spending on sedans this year.
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