DETROIT -- The redesigned 2014 Cadillac CTS sedan began arriving in showrooms last week with a relatively strong residual value, which should help General Motors offer a competitive lease to offset a big price hike.
Last week, ALG, a research company that monitors and projects vehicle values, assigned an average forecasted residual to the CTS sedan of 48 percent after 36 months. That's stronger than the 46 percent average of its luxury peers and improved from the 41 percent residual on the outgoing 2013 CTS sedan, ALG says.
Typically, nameplates that get a significant price increase do not retain their resale values well, says Eric Lyman, ALG's vice president of residual value solutions. Prices on the 2014 CTS are from $6,000 to more than $16,000 higher than comparable 2013 models.
The CTS improved so much from the outgoing generation that its residual didn't suffer despite the bigger prices, Lyman says. But he's not sure whether Cadillac will be able to command those prices without resorting to incentives that ultimately can damage the brand's value.
"We know how good the car is," Lyman says. "The concern is that a CTS customer looking to trade in or whose lease is up might not know how much better the performance is. Will they see the value?"
Residual values are used by lenders to set monthly lease payments. A higher residual means that the vehicle will be worth more when the lease is up, which allows the lender to set a lower monthly payment. This year, leases represent 40 to 50 percent of Cadillac's sales, spokesman David Caldwell said.
Cadillac still is finalizing its CTS lease program. It "will be competitive with the big players in the segment," Caldwell said.
Dealers say that a competitive lease program will be crucial for strong sales of the redesigned CTS because of the big price increase. Ranging from around $46,000 to $70,000 for a CTS Vsport, the pricing is more in line with the Mercedes-Benz E class and BMW 5 series, both nameplates from which Cadillac is trying to poach customers.
"The car is phenomenal and deserves a bump in price," says Chris MacConnell, dealer principal at Thomson-MacConnell Cadillac in Cincinnati. "The market for it is going to be determined by the lease program."
The 2014 CTS, built on a new platform, is longer but 250 pounds lighter than the outgoing generation for better handling and fuel efficiency. It has more standard features, including the CUE infotainment system and Brembo brakes.
