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Audi To Limit Lease Deals in U.S.
Parent auto maker Audi AG is keeping the supply of certain vehicles constrained, such as the A3 hatchback, so that profit margins won’t be eroded, de Nysschen says.

There is only a 60-day supply of A3s, he says, noting that while leasing is 52% of Audi’s overall business, no lease deals are offered on the hatchback.

“We cut off potentially half of the market for the A3 in order to earn full profit contribution on every unit,” de Nysschen says.

More than 80% of A3 buyers are new to the Audi brand and are switching from other European marques vs. domestic car brands, he says.

Audi also is limiting supply of its flagship A8 sedan to 60 days to maintain its residuals. “That model should not be freely available,” de Nysschen says, adding about 35% of Audi vehicles are custom ordered.

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Audi To Limit Lease Deals in U.S.



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truecarlovertruecarlover - 4/11/2007 11:21:52 AM
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Sounds like a good - smart business strategy to me. It is interesting that there worldwide strategy is to topple Mercedes and BMW - but in the states it says they want to remain "exclusive" and not match BMW, Lexus, and Mercedes. I take him at his word because at the car show Audi's floor space - while well travelled - was MUCH smaller than those three and off in a corner. Still they had a good amount of traffic though.

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gsh23gsh23 - 4/11/2007 11:41:00 AM
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1970toyotamarc1970toyotamarc - 4/11/2007 12:01:07 PM
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Maybe they should offer leases that make the cars cheaper than Camrys, like BMW apparently does.....

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EnnNorakEnnNorak - 4/11/2007 2:23:50 PM
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I leased my 2004 A6 in Canada. Audi had a special Canada only marketing program with a 0.96% lease rate (that's like free money) and additional warranty and free scheduled maintenance provisions under what they call "Audi Advantage". I took a 4-year lease knowing that all I have to do is drive it and Audi would look after eveything else. Without that special deal, I would not have considered the Audi so my advice to Audi is to think twice before weakening its lease programs. There is just too much competition these days and most luxury features have already trickled down to lesser cars. My only annoyance is that the original Michelin tires wore out after only 40,000 km and Michelin stopped making them so I had to buy a whole new set of V-rated Pirellis instead of just 3 Michelins using the unused tire on the matching alloy spare wheel in the trunk as my 4th tire.

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izfuneyizfuney - 4/11/2007 3:35:51 PM
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"More than 80% of A3 buyers are new to the Audi brand and are switching from other European marques vs. domestic car brands, he says. "

Sucha an interesting statement ! I wonder which brands ? Apart from Volvo only VW had competitors in this segment. The price hike for the new Jetta makes the A3 a pretty smart choice.

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AlexTxAlexTx - 4/11/2007 4:26:04 PM
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Most of the Audi clients that get the high $$$ Audi, don't lease them...they buy them cash!

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S4cabriofoxoneS4cabriofoxone - 4/11/2007 10:14:52 PMView My AgentSpace
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I financed mine, but I paid cash for the A3. No leases for me. I was done with leasing after my '00 A6.


indoctrin8edindoctrin8ed - 4/11/2007 5:04:30 PM
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This is Audi artificially influencing supply and demand in the short term.

This business decision reveals the fact that the only way Audi can keep the prices UP on their less popular cars (in the US) is to make them less available.

Why would they have to do this, and BMW and Mercedes do not?

Because the demand is low. So in order to keep the prices up on USED vehicles they have to make them more RARE. Limiting supply and lease deals is the method.

Why would Audi care about the price of used vehicles? Two reasons:

1) If they assume the car after a lease up, if the car TANKS in value, then they take a bath when they try to sell it. Profits evaporate here if this happens. By making the cars rare, the used car prices stay up, making their lease returns more valuable.

2) If the used car market takes a dive, it is much harder to justify buying a new Audi over a pre-owned. By making the cars rare, the used car prices stays up, making new car sales more attractive at Audi's alredy high price points.

Bottom line: Some Audi models are boat anchors to the masses in the US: The A8 and the A3. BMW, Mercedes doesn't have this problem with their 7 ans S series because true demand is keeping the prices from falling, not artifically limiting supply; and neither has cars in the A3 market segment... by design.



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indoctrin8edindoctrin8ed - 4/11/2007 5:08:59 PM
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Also, note that a lease rate is determined by two factors: The cost of the "loan" plus the depreciation of the car. The more a car depreciates, the more the lease payment will be. High depreciating cars don't lease well. Audi A8s and Jaguars are a perfect example of this. BMWs and Lexus lease well because they keep their value at the end of the lease, lowering the cost to lease it.

Most all good leasing deals are manufacture subsidized. Controlling the used market values of these cars is critical to a successful leasing program.

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CBR2200CBR2200 - 4/11/2007 5:13:16 PM
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I drive an 07 A4 instead of a 335 right now because they had a great lease deal. I lease a new car every two years. If Audi doesn't offer a good lease deal then they will lose my business every two years. Is that going to help them profit?

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indoctrin8edindoctrin8ed - 4/11/2007 5:41:25 PM
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Yes, it could help Audi profit by NOT leasing you a car.

Audi has to be able to sell your car when you are done leasing it. If the amount they lose when selling your depreciated lease-returned A4 is more than the profits they made on the new car, then it's a LOSS in profit to them, and thus NOT worth doing. Forcasting lease residuals is risky thing.

IF NECESSARY, (as in this case with the A3/A8), Audi will try and preserve the prices of their used cars by limiting supply and limiting deals on leases. This is a continual balancing act, but it reveals that Audi made a wrong bet on their anticipated demand for the A3/A8 models in the US, and is now course correcting.

BMW 335s are in such high demand, with no end in sight, that there is no need to "push" them out the door with good lease deals to make room for upcoming production quantities. You didn't buy one, but there's 10 more people in line behind you who will, so BMW doesn't mind. Audi doesn't have this "problem" with their A3/A8s.

Once demand stabilizes, if it does, then lease deals on 335's will surface that are in line with ongoing supply, but not so much as to saturate the market to drive used car prices down, which then, in turn jeopardizes the demand for new cars.

~indoctrin8ed, MBA.

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JMd71JMd71 - 4/11/2007 8:44:17 PM
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Uh, check your data and BMWUSA.com. The entire lineup (except the 5) has lease deals; and has been so for much of the 1st quarter. The 7 has been a lease special since last year... The X5 just came out and already has a lease special (V6 model).

In the Bay Area, I see A3s all over the place.

I have to agree, though, that if you are only looking for a solid, 24 to 36 month German car experience, the brand that looks best is the one with the most bang for the buck.


S4cabriofoxoneS4cabriofoxone - 4/11/2007 10:19:21 PMView My AgentSpace
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When I was in L.A. two weeks ago, I travelled all over (Beverly Hills, Santa Monica, etc), and I saw tons of A3s, also. Specifically, they were all grey. I don't understand why.

But what you see doesn't necessarily translate into sales. The A3 hasn't had any huge market surge- its sales are pretty steady. If the A3 loses 50 cars one month, the percentage of loss is inflated, but it still is quite static.


indoctrin8edindoctrin8ed - 4/11/2007 8:59:28 PM
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You can lease ANY car. But that's not my point when I said "Deal". By "Deal" I mean a GOOD DEAL, which is an incentive.

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JMd71JMd71 - 4/11/2007 10:56:21 PM
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You said "BMW 335s are in such high demand, with no end in sight, that there is no need to "push" them out the door with good lease deals to make room for upcoming production quantities."
- They are, in fact, pushing them out the door with GREAT lease deals.

Most people like good deals, so if you are not a brand whore but had a choice between a (similarly optioned) 335i, A4 3.2 or C320, the heart will go for style and the head will for the better deal.


truecarlovertruecarlover - 4/12/2007 12:29:06 AM
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This is a car business. They said they want to be profitable and not just sell more cars at a lower profit. That is true growth. They could cut the list price on their vehicles and sell thousands more - but they don't want to do that - they want to measure how valuable the brand is. If you check - last year Audi only trailed Lexus and BMW in residual value. Keeping their cars rare is not a bad strategy. In business it is more important to be profitable than to spread yourself all over the place.

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CBR2200CBR2200 - 4/12/2007 3:45:50 AM
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^Tell that to Walmart! ;)

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huu76huu76 - 4/12/2007 10:42:37 PM
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Acura lost my sale because Jeep was offering 0%, 0 down (plus the MDX wasn't available in white yet). $10,000 down and the MDX payment would be $100 more per month. I like wide SUVs but that's $6000 more over the life of the financing term.

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lewissalemlewissalem - 4/13/2007 9:30:29 AM
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I agree with posters here. Audi lost me and my wife's sales to BMW for two key reasons: Lease rates, and full coverage to 50k miles.

We were looking at the a3 and it was cheaper to lease an a4. I know a lot of this has to do with residual values, and they're not as good for Audi.

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