De Nysschen: They'll improve if we're disciplined
It's hard to erase the sins of the past.
That could be the takeaway from resale-value forecasts for Cadillac's newest entries: The XT5 midsize crossover and the CT6 large sedan.
Residual forecaster ALG assigned 36-month resale values that are respectable but lag key rival vehicles in each category. That will make it costlier for Cadillac to offer leases that are competitive with BMW, Mercedes-Benz, Lexus, Audi and other players in the luxury market, where leasing accounts for the lion's share of sales.
Cadillac President Johan de Nysschen said the residual values on both vehicles are good enough to allow Cadillac to offer competitive leases. But he acknowledged disappointment.
"I believe that they should be better," he said in an interview this month.
That disconnect has more to do with Cadillac's brand image relative to its luxury rivals than it does the refinement and driving dynamics of the XT5 and CT6, says Eric Lyman, vice president of industry insights at ALG.
While Cadillac's brand health has improved on several fronts since de Nysschen's mid-2014 arrival -- including a roughly $5,000 gain in average transaction prices last year, to around $52,000, thanks in part to lower incentives -- Lyman says it will take time for those wins to translate into significantly higher residuals.
"Residuals are heavily impacted by brand value," Lyman says. "Cadillac is going head-to-head with some brands with very strong equity, like Mercedes-Benz and BMW."
Plus, memories linger of the ATS sedan launch in 2012 and the CTS rollout a year later, which were plagued by overproduction and pricing that required big incentives to move cars, hurting residuals, Lyman says.
For the CT6 sedan, which began shipping this month, ALG's forecast residual after 36 months is 46 percent. That mostly trails the residuals of the midsize luxury sedans that ALG expects most shoppers will compare to the CT6: BMW 5 series (49 percent), Audi A6 (52 percent) and even Cadillac's own CTS (47 percent). Even though the CT6's size straddles the midsize and large-sedan segments, ALG classifies it as a midsize because its pricing -- starting at $54,490, including shipping -- is closer to those cars than it is to larger sedans such as BMW's 7 series.
The 54 percent residual assigned to the 2017 XT5 trails the 57 percent residual for the redesigned 2016 Lexus RX, which for years has led the midsize luxury crossover segment over the No. 2 Cadillac SRX. The XT5 replaces the SRX next month. The spread would be wider using the same model year, ALG says.
De Nysschen said he's confident that residuals will improve over time as Cadillac continues to show discipline on incentives and a sharper focus on remarketing of used cars.
Keith Harvey, general manager at Gold Coast Cadillac in Oakhurst, N.J., has his fingers crossed for a competitive lease on the XT5 especially. He says leases accounted for around 85 percent of his SRX sales, which have done well thanks partly to a strong lease program.
Said Harvey: "Dealers are optimistic that our lease points at launch will be competitive."
