SUV Demand Spells Trouble for Off-Lease Luxury Sedans

Sebastien Bell
by Sebastien Bell

Most American manufacturers posted their October sales results yesterday, and the numbers all reflected the popularity of SUVs.

That conforms to the current trend toward bigger vehicles and away from sedans. And while many automakers are now ready to deal with that demand with their new cars, the used car market is still lagging behind.

That’s causing a head ache for luxury manufacturers, because brands like Audi, Mercedes, and Lexus, depend on leases more than their more mass market counterparts. And with off-lease sedans coming back in droves, and buyers looking for SUVs, there’s a glut of second hand sedans forming.

“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, told Bloomberg recently. “You’re throwing all these cars into the marketplace a couple years after it has evaporated and jumped into SUVs.”

Just three years ago, SUVs made up only 42 percent of luxury sales, while this year that number has jumped to 56 percent. Until demand for SUVs levels out, the used car market will be out of step with demand.

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That will cause a depression in the prices of used luxury sedans, which is fun for people on the used market, but will make it harder to luxury manufacturers lease them. Since the value of off-lease vehicles is a big factor in their price, manufacturers will have to start ramping up incentives to sell their sedans.

SUThis September, Audi spent an average of only $1,986 on incentives for its Q5 and Q7—the lowest among the top selling luxury brands, according to Autodata Corp. By comparison, discounts on sedans cost Audi about $4,696 per vehicles. And the same goes for the rest of the luxury brands.

All of which is bad news for lovers of the humble sedan.

[Source: Bloomberg]

Sebastien Bell
Sebastien Bell

Sebastien is a roving reporter who covers Euros, domestics, and all things enthusiast. He has been writing about the automotive industry for four years and obsessed with it his whole life. He studied English at the Wilfrid Laurier University. Sebastien also edits for AutoGuide's sister sites VW Vortex, Fourtitude, Swedespeed, GM Inside News, All Ford Mustangs, and more.

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