Lexus Boosts Incentives to Fight Off Mercedes, BMW
With BMW and Mercedes-Benz threatening to dethrone the luxury brand, Lexus cranked up the incentives during August with its eye clearing out 2011 model-year units and “making up some lost ground,” according to Edmunds.com.
But how will what Edmunds called a “Hail Mary” play impact resale values for Lexus?
Though the company stressed to Auto Remarketing on Friday that this analysis is only based on sales data and doesn’t include leasing, Edmunds pricing manager Richard Arca noted: “Lexus increased their special APR from 2.9 percent to 1.9 percent. Basically, that saves the buyer about $0.44 for every $1,000 financed for a 60-month term. That saves the consumer about $13.20 per month on a $30,000 loan.”
He added: “Also consider that consumers still have to qualify for the financing and I assume not all will qualify. The immediate resale value effect for the increased special APR financing should be little to none for newer used Lexus vehicles.”
Delving further into Lexus’ incentive spending during August, Edmunds noted that Lexus spent $2,667 per vehicle, a 41-percent month-over-month hike.
No other major automaker showed a heftier upswing, Edmunds noted, pointing out that BMW ($3,664 per vehicle) increased just 4 percent and Mercedes-Benz ($3,808) was actually down 9 percent.
“Unlike many of its competitors who are starting to focus on 2012 model year vehicles, Lexus is getting more aggressive about selling its 2011 models in hopes of making up some lost ground,” said Edmunds senior analyst Jessica Caldwell.
“It might be a Hail Mary on their part, but if Lexus can make up even some ground in the next four months, it will give them a little momentum when the race starts all over again next year,” she added.
Edmunds did stress, however, that Lexus’ rivals “are hardly resting.” Mercedes aims to spur conquest sales into the M-Class and E-Class vehicles through $4,000 incentives. These vehicles are also in the same segments as Lexus’ RX and EX vehicles, which Edmunds called the Japanese automaker’s “two strongest products.”
Currently, the year-to-date “luxury sales race” belongs to BMW, which has moved more than 135,000 units through July. Mercedes is at 129,932 sales and Lexus is at 102,549.
A year ago, Lexus was roughly 5,000 ahead of every other luxury brand with year-to-date sales of 126,000 through July 2010, officials pointed out.
Offering the perspective of a dealer, Ray Mungenast, president of the Mungenast Automotive Family that includes a Lexus dealership, had this to say about Lexus’ incentives: “Our August sales were better than we anticipated mainly due to combination of very good incentives from Lexus and the Central Area office working with the dealers to fill sold orders.
"The incentives in August and December are typically the best we have all year and this past August was no exception," Mungenast continued. "Lexus has done a very good job in focusing on owner retention and our August sales reflected that effort.”