Last month, residual forecaster ALG assigned 36-month resale values to the 2016 Cadillac CT6 and 2017 Cadillac XT5. Though the values are respectable, they lag key rivals. The lower residuals will make it costlier for Cadillac to offer leases comparable to those from BMW, Mercedes-Benz, Audi, Lexus, and other brand in the luxury space, where leasing makes up the majority of sales.
So the question now is, why are the residuals lower for both models? After all, both vehicles are very good in their competitive sets.
What it all comes down, according to Eric Lyman, vice president of industry insights at ALG, is the image of the Cadillac brand relative to its luxury rivals, rather than vehicle quality, refinement, technology, or driving dynamics.
This is an interesting circumstance, since Cadillac’s overall brand health and image have improved over the last several years. The brand has gained roughly $5,000 in average transaction prices to roughly $52,000 in 2015 thanks in part to lower incentives. But Lyman says that it will take some time for those successes to translate into increases in residual values.
“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.”
Lyman also refers to the rough launches of the ATS Sedan in 2012 and the third-generation CTS Sedan a year later. Both were afflicted with overproduction and prices that needed big incentives to sell vehicles, both instances that hurt residuals.
Cadillac President Johan de Nysschen has gone on record as saying that the residuals will improve over time. With the sales operations discipline, heaps of new product, and newfound brand management that Cadillac has been exhibiting, we wouldn’t bet agains the brand with the
Wreath and Crest.