This article will answer a lot of questions why lease rates have jumped up and will jump up more especially when the 2009 models show up.

http://online.wsj.com/article/SB1220...ature_articles

EYES ON THE ROAD
By JOSEPH B. WHITE






Sales Slump in Luxury-Car Segment
And Auto Makers Offer Deals
Luxury Brands Shun 'Cash Back' Rebates,
Offer Cut-Rate Financing to Draw Buyers
September 8, 2008; Page D8
Here's something you don't see every day: Factory sponsored low interest rate financing deals on new BMWs. But they're out there now, because even luxury brands are getting bounced around by a choppy economy.

Several major luxury brands, including BMW, Tata Motors Ltd.'s Land Rover, Daimler AG's Mercedes-Benz, Toyota Motor Corp's Lexus, Nissan Motor Co.'s Infiniti are promoting discounted leases or other price cutting deals to spur sales. These brands tend to shy away from crude, mass-market come-ons such as direct cash rebates or "employee pricing" offers. But the deals are there waiting for customers who start bargaining. In August, 63% of luxury vehicle sales involved some kind of cut-rate financing, compared to 43% a year earlier, according to data from the Power Information Network (PIN), which harvests transaction data from dealerships.

The average cash rebate offered by luxury brands in August was $3,240, up from $2,624 a year ago, PIN's surveys found. But a few brands went above and beyond. Land Rover's British-made SUVs went off lots in August with an average $7,016 cash rebate tucked into the glove box, according to PIN data. Land Rover's deals outdid Cadillac and Lincoln – which have tended to discount more heavily than European and Japanese brands. General Motors Corp.'s Cadillac brand offered cash rebates averaging $4,105 dollars a vehicle last month, up from $2,758 a vehicle the year before, according to PIN.

JOIN THE DISCUSSION


Readers, over to you: Do you think more deals will boost sales of luxury vehicles?Join a discussion.Discounts in the luxury vehicle segment are seasonal and cyclical. They tend to be richest in the fall, when car makers launch their new models, and in the dead of winter -- December and January, according to data from Edmunds.com, which tracks the ebb and flow of incentives. The cyclical part has to do with the auto makers' product timing. When important model lines get old, the discounts rise.

Minor ups and downs in the economy tend to have less impact on luxury car demand, because affluent consumers usually ride out those dips without much real damage to their financial profiles. But if the storm gets violent enough, even well-to-do people will rethink whether it's absolutely essential to trade in a perfectly good car.

That's happening now. The coinciding crunches in the real-estate market and in the finance industry apparently have prompted difficult discussions around kitchen tables even in homes with granite countertops.

Sales in the "lower luxury" car segment, which includes the BMW 3-Series, Acura TL, Infiniti G35 and Lexus ES and IS models, are down 10.3% for the year through Aug. 31, according to Autodata figures. That's almost five times worse than the 2.1% decline for passenger car sales overall. Total luxury car sales are down 14.2% for the first eight months of 2008. Luxury sport-utility vehicle sales are down nearly 18% for the year so far -- a decline that understates the accompanying impact on car makers' profits.

At BMW, the company's U.S. marketing arm has extended its low interest rate financing offers on 2008 models to the end of October, though the deals on certain models aren't as generous as in August. Still, if you qualify, you can get a 0.9% loan on a 335i sedan, or a free automatic transmission.

One of BMW's goals in promoting low-rate financing deals is to encourage more customers to buy, rather than lease, says BMW spokesman Jan Ehlen. BMW has tended to lease about 60% of its cars. Now, the company wants closer to a 50-50 ratio, Mr. Ehlen says.

Leasing has been causing heartburn across the car industry. Too many vehicles -- particularly leased sport-utility vehicles -- leased three years ago when gas was still relatively cheap and the economy was relatively strong are coming back to dealerships worth thousands less than the finance companies had bet when the deals were written. That's translated into huge losses for car makers' lending arms and for the banks and independent finance companies that underwrote leases in the past. Many financial institutions are pulling back from auto leasing, as part of a broader credit retrenchment.

Discounts for several major luxury brands may have peaked in July, when gas prices hit new highs and overall new vehicle demand plunged, says Jesse Toprak, executive director for industry analysis at Edmunds. Now, some of the deals are less generous, he says. But pressure will likely continue for the luxury makes, particularly when it comes to the lower ends of their model ranges. A lot of upper middle-class families stretched to buy $35,000 or $40,000 BMWs and Mercedes-Benz C-Class models when times were good.

Now, says Mr. Toprak, "they're thinking twice."

The current crop of luxury car promotions will dwindle as new models arrive this fall, many equipped with higher sticker prices. BMW has already signaled prices for its vehicles will rise an average of 2.1%. Most of the top-selling luxury brands aren't saddled with huge inventory overhangs. At the end of August, BMW had 30 days worth of unsold vehicles on dealer lots, Mercedes had 62 days' worth of unsold vehicles and Lexus 41 days' worth.

Audi has already largely sold off leftover 2008 A4 models, and dealers have only about a month's worth left, as they await delivery of redesigned A4s from Germany.

Luxury brand shoppers – particularly fans of European brands -- who are considering buying a new car in the next few months should probably book time to discuss options with dealers this month. Otherwise, it may be best to wait to see how the December year-end deals look.

 

Is there a Cliff Notes version available?

 

^^^^^^^^ahahahahahaha rotflmao

 

short version: economy sucks + luxury cars decline in sales = more dealer incentives

 

And we needed the WSJ to tell us this because???

I think 3/4 of the world knows the US economy blows right now.

 

It's the statistic in the article that's interesting not the general statement. I doubt people like us, without connection to the industry can really find out how much inventory they have left on the dealer's lot.

 

Nice find, da mayor.