Slashed Rates Factor High in Premium Push
As you read last week, the U.S. auto industry continues its climb out of the coronavirus ditch, with foreign automakers pushing back at a briefly dominant Detroit in a bid to restore sales sanity.
The domestic three managed to unload an awful lot of big-margin trucks during the lockdown, propelling scared customers into dealers with zero-interest financing on long-term loans. Detroit’s rivals have now fully caught on, fighting back with their own offers. For Lexus, the new proposal to buyers doesn’t even end at the new-car lot.
As reported by CarsDirect, Lexus got a jump on Memorial Day weekend sales by introducing its new lower rates a week early. Actually, forget “lower” — on Friday, the brand dropped its APR to zero on 60-month loans until the end of the month. This applies to every model in the Lexus lineup, and the same goes for unsold 2019 vehicles.
If five-year terms leaves you feeling antsy, moving to a 72-month loan will still net you savings compared to Lexus’ previous offer. The brand now pegs its best six-year loans at 0.9 percent APR in the Northeast and 1.9 percent elsewhere, versus 3.9 percent nationwide a year ago. Pulling out its calculator, CarsDirect notes that the most-reduced rate would save a buyer 66 bucks a month on a $50k vehicle.
Eager to make any sale it can, Lexus also pushed the rate on its 36-month certified pre-owned loans to zero — apparently, for the first time in the brand’s history.
On the new-car lot, Lexus’ across-the-board rate slash could make some of its models more attractive to shoppers than a Toyota-badged model. Take the popular Lexus RX and Toyota Highlander as an example, where a no-interest, 60-month loan on the RX would set a buyer back more than $100 less than the no-deal-here Highlander, despite their similar MSRPs.
Across the industry, rates are falling like annual volume projections among premium automakers, with notable inclusions being BMW and Infiniti. Data from J.D. Power shows the premium market occupying nearly the same slice of the retail mix as before the pandemic hit. The week ending May 10th saw premium sales amount to 12 percent of the U.S. sales tally.
[Image: Lexus]
More by Steph Willems
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I am waiting for decontenting and cheapening of sold vehicles
This will simply pull ahead purchases/leases. I think we learned in 2008-2009 that once you get the public hooked on 0% and piles of cash on the hood, its tough to ween them off. Its almost like the environment leading up to the bankruptcy of GM and Chrysler. Excess capacity, destruction of demand, incentives killing profitability. It may be a tough pill to swallow, but with inventories at close to all time lows for a lot of models, keeping transaction prices high and controlling production would have been a better solution. But once one kid jumps off a bridge, the rest follow. This is bound to net subprime and lower credit tier buyers. Fantastic terms are generally available several times throughout the year for tier one buyers.