This Week in Car Buying: Lexus’ new lease; Tesla cuts prices again; Transaction prices up; Lender shifts to used cars
Lexus has developed a new short term comprehensive lease that is designed to compete with subscription plans like Care by Volvo. The new full-service Lexus Complete Lease is a 2-year contract with a limit of 10,000 miles per year. It also includes insurance, maintenance and other services.
Designed to be offered on the 2019 Lexus UX small crossover SUV, the new program is being offered in seven states: California, Florida, Illinois, Indiana, Massachusetts, New Hampshire and Rhode Island.
“This type of alternative leasing program aligns with the heart of Lexus, providing an amazing guest experience in every way,” said Lisa Materazzo, vice president, Lexus marketing. “By appealing to those looking to simplify their monthly commitment, the Lexus Complete Lease program makes the process more streamlined for our guests.”
The lease is offered by nearly 80 dealers and includes insurance coverage from Travelers, which features liability and physical damage coverage with a $500 deductible. Other features covered by the lease payment include all scheduled maintenance, Guaranteed Auto Protection (GAP coverage), two years of connected vehicle services including satellite radio, tire and wheel protection and a $1,000 allowance for wear and use.
“The additional convenience and attractive list of services offered in the Lexus Complete Lease provide the enhanced and simplified payment experience our guests want,” said Materazzo. “Travelers has earned a reputation as one of the best auto insurance companies in the industry, delivering high-quality products and services that fit with the prestige of the Lexus brand. We want our guests, new and existing, to feel they are receiving above and beyond the standard – just as they would extend to a guest in their own home.”
Tesla cuts prices again
Tesla has reduced the price of its Model 3 electric sedan by $1,100. The new starting price for the EV is now $42,500. Earlier this year, Tesla dropped the price by $2,000 to partly offset the reduction in the $7,500 federal tax credit for the brand. Since the company has sold more than 200,000 vehicles, that credit was cut in half at the beginning of the year to $3,750 and will be cut in half again mid-year before being eliminated all together at the start of next year.
The EV pioneer has also eliminated the referral program where owners bringing new customers to the brand would win prizes as well as announcing layoffs of as much as 7 percent of its workforce. CEO Elon Musk said he is looking to cut costs across the board in an effort to boost profitability and to price its product more competitively in the market as new rivals come on stream.
Average transaction prices up
The price of new vehicles continues to climb according to data collected by Kelley Blue Book. The average transaction price for January was up 4.2 percent or $1,482 over year ago levels to hit $37,149. Prices have declined slightly month over month, dropping $643 or 1.7 percent from December 2018.
“There are several factors contributing to strong average transaction prices, which climbed 4 percent year-over-year,” said Tim Fleming, analyst for Kelley Blue Book. “First, Tesla has approached BMW and Mercedes-Benz U.S. sales numbers in recent months with even stronger transaction prices. Also, full-size trucks are more popular than they have been for over a decade, and the new Chevrolet Silverado, GMC Sierra and Ram 1500 pickups helped drive prices up.”
Subaru had another strong month, as average transaction prices rose more than 5 percent, with the Crosstrek improving most at 7 percent. In addition, the redesigned Forester posted a 3 percent improvement year-over-year. The new Ascent SUV is helping the brand with average transaction prices close to $40,000. Finally, the Outback, now in the last year of its generation, was down 1 percent.
On the other hand, Hyundai-Kia prices fell nearly 1 percent for the month. Hyundai climbed 2 percent, but Kia dropped 1 percent. Hyundai was helped most by the refreshed Tucson, up 4 percent, and the new Veloster continues to impress, rising 9 percent. Kia was hurt most by the Soul, which was down 5 percent, as the next generation will be launching soon. The Genesis brand also fell 5 percent, following the introduction of the G70 sedan as the new entry point in its lineup.
Lender shifts to used cars
Another sign that 2019 may be the year of the used car is that lending giant Ally Financial has seen its used vehicle lending grow in the fourth quarter last year while its overall auto loan activity has dropped. The bank said that its auto loan originations have fallen by 11 percent from a year earlier to $8.2 billion while used vehicle loan activity actually grew 13 percent to $4.3 billion.
More than half of Ally’s auto loans are for used vehicles, climbing from 42 percent of its portfolio to 52 percent. The increase in used vehicle loans is driven by the firm’s agreeing to finance loans for Carvana, and DriveTime, the former getting up to $2.3 billion from Ally, and the latter $750 million.
According to Ally, its new vehicle loan originations accounted for 38 percent of its portfolio, compared with 44 percent the year earlier. Leasing activity has also dropped to 10 percent from 14 percent year-over-year. While it is increasing its funding of used vehicle channels, it has reduced the amount of money it is funneling to General Motors and Fiat Chrysler Automobiles (FCA) dealers by $900 million overall. New vehicle loan activity through other channels also dropped by an additional $100 million.
The redesigned 2019 Ram 1500 pickup truck has added a trick tailgate that not only can be raised or lowered, but also swings open from a 60/40 split. Get more details here.
Kia has jumped into the electric vehicle race with the 2019 Kia Rio EV. We get behind the wheel of this compact crossover in this First Review.
As truck popularity peaks, the time is right for Kelley Blue Book’s 2019 Full-Size Pickup Comparison Test. We pit the Ford F-150, Chevrolet Silverado and Ram 1500 against each other.
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