America's Love for Luxury SUVs Is Screwing With Off-lease Sedan Sales

by Matt Posky

Published: November 2nd, 2017

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.

[Image: Audi]

#AutoSales #AutomotiveTrends #CrossoverLust #Crossovers #IncentiveSpending #Leasing #LuxurySuvs #NorthAmerica #Off-lease #SedanSales #UsedCarMarket #SupplyAndDemand

Matt Posky

A staunch consumer advocate tracking industry trends and regulation. Before joining TTAC, Matt spent a decade working for marketing and research firms based in NYC. Clients included several of the world’s largest automakers, global tire brands, and aftermarket part suppliers. Dissatisfied with the corporate world and resentful of having to wear suits everyday, he pivoted to writing about cars. Since then, that man has become an ardent supporter of the right-to-repair movement, been interviewed on the auto industry by national radio broadcasts, driven more rental cars than anyone ever should, participated in amateur rallying events, and received the requisite minimum training as sanctioned by the SCCA. Handy with a wrench, Matt grew up surrounded by Detroit auto workers and managed to get a pizza delivery job before he was legally eligible. He later found himself driving box trucks through Manhattan, guaranteeing future sympathy for actual truckers. He continues to conduct research pertaining to the automotive sector as an independent contractor and has since moved back to his native Michigan, closer to where the cars are born. A contrarian, Matt claims to prefer understeer — stating that front and all-wheel drive vehicles cater best to his driving style.

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5 of 48 comments

Mmreeses on Nov 03, 2017

So i guess that the comments over EV tax credits got so nasty the whole thread needed to be locked. I'm curious what was nasty enough to trigger it.....how many comments did hit take before someone brought up Hitler? :)

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- Tnk479 on Nov 12, 2017
  
  I am sure it didn't take long. Rich liberals get pretty upset when you threaten to take away their government subsidies for utopian dreams. On the one hand they say that the wealthy should be taxed more, but, they have this fantasy that there are millions upon millions of billionaires who should fund their utopian green energy and universal health care fantasies. It never occurred to them that they are in fact, rich, by both global and national standards. As the most recent example, look at the kerfluffle over the proposed elimination of the State and Local Tax (SALT) deduction, which principally affects very high income families in San Fransisco, New York, and Washington DC. By the way, I am all for utopian dreams and I think electric cars are pretty cool, but, the wealthy can pay for them. Thanks for reading.
  
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- 28-Cars-Later on Nov 13, 2017
  
  @tnk479 FYI it will eventually affect you too through inflation. Limits/deductions are frequently set to a figure. Taxes/bracket and inflation are percentages. Wages post 1971 continue to stagnate vs cost of living. Funny how all that works. Bad plan. Stealth tax hike to keep the game going without actually fixing anything. #winning. #iliveinreality. #twitterisstupid.
  
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- Ray Davies on Nov 15, 2017
  
  @tnk479 The counties that voted for Hillary contribute 70% of the GDP. The red states are low wage and use more Federal tax dollar then they give.
  
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Ray Davies on Nov 15, 2017

Wait until the next war and 5 dollar gas. Might not be long. Back to the days of people putting 100 bucks into their trucks and driving to work by themselves as they blame the gas station owner.

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