General Motors is hoping that the relatively strong residual value of its 2014 Cadillac CTS would help it sell more of the redesigned luxury sedan. The ALG research firm assigned last week an average forecasted residual of 48 percent after 36 months to the CTS – stronger than the average residual value of its peers (46 percent) and the residual value of the 2013 CTS (41 percent).
The 2014 CTS models are expected to cost between $6,000 and $16,000 more than comparable 2013 models. Eric Lyman, ALG's vice president of residual value solutions, remarked that, typically, nameplates whose prices have significantly surged do not retain their resale values well. He remarked that the residual value of the CTS didn’t go down despite higher prices thanks to the improvements made on the new generation.
Lyman, however, said that he is unsure whether Cadillac will be able to command those prices without resorting to incentives that may damage the brand's value.
He, however, said their concern is that “a CTS customer looking to trade in or whose lease is up might not know how much better the performance is.“ Residual values are typically used by lenders to set monthly lease payments. If a vehicle has a higher residual, it will be worth more when the lease is up. This allows a lender to set a lower monthly payment.
Cadillac spokesman David Caldwell has said that for 2013, leases accounted for 40 to 50 percent of Cadillac's sales. Cadillac, however, is still is finalizing its CTS lease program, which according to Caldwell, will be “competitive with the big players in the segment." Dealers quipped that a competitive lease program will be crucial for strong sales of the 2014 CTS due to the big price hike.