Volvo dealers worried at their make meeting that Volvo might cut back too far on leasing.
Sales fell 15.1 percent for Volvo Cars of North America Inc. in January to 8,175, in part because captive finance company Volvo Finance North America cut back on discount lease offers. That could be a taste of things to come for Volvo and other luxury brands if leasing slows substantially in 2001.
Volvo had record U.S. sales of 123,178 cars in 2000. That was 5.6 percent ahead of a record in 1999 but short of Volvo's goal for 2000, set at this time last year, of 145,000 units. Volvo's longer-term goal is to sell 200,000 units in 2004. That will be tougher if the U.S. economy slows in general and luxury-car leasing slows in particular.
'In the short run, this (leasing slowdown) is going to have a pretty dramatic effect on volume. You're seeing this across the board in the lease-sensitive segments of the market,' said dealer Kjell Bergh after the meeting at the NADA convention.
'In December my dealerships did something like two-thirds leasing. In January it was exactly the reverse, around two-thirds retail (loans) and only one-third leasing. Of course, in the long run, it's the healthy thing to do, to get off these unrealistic residual values. And it's true that this not something just at Volvo,' he said.
For instance, Jaguar's U.S. sales fell 18 percent in January to 2,511.
Bergh owns Borton Volvo Inc., which has outlets in Minneapolis and Golden Valley, Minn., and in Delray Beach, Fla.; and Borton Volkswagen in Delray Beach.
Sales of Volvo's small cars, the S40 sedan and V40 wagon, were off 57.9 percent in January to 1,868. That was partly because Volvo Finance dropped a factory-supported lease program on the small Volvos, called 'Sign and Drive,' which was available in the fourth quarter, said Angelo Nyars, Volvo Finance vice president of sales.
'It was a generous offer - too generous. It was designed to boost volume at the end of the year, and we stopped it. We're now asking people for more money down,' he said.
Nyars said some Volvo residuals are higher than the benchmark Automotive Lease Guide, and some are lower. Volvo Finance has not cut residuals across the board, he said.
At the make meeting, Volvo asked its dealers to put greater emphasis on used-car sales this year. In the second quarter, the company expects to inform dealers of an improved program for selling factory-certified used cars. Better used-car sales would help support residual values and help dealers offset softer new-car sales.
Volvo CEO Mark LaNeve said Volvo continues to offer leases with factory incentives. 'But we're not going to be crazy about it.'