Lexus' UX will test market for flexible lease options

SEATTLE — The "all-inclusive" lease package Lexus is offering in certain markets with its new UX subcompact crossover will be a test of how much new luxury customers are willing to pay for simplified, flexible alternatives to ownership.

The Lexus Complete Lease, announced last month, is a two-year, 20,000-mile lease program for the UX that includes insurance, maintenance, tire-and-wheel protection and telematics services in one payment. The add-ons have fixed prices, but Lexus said the overall monthly price will be set by dealers in the selected markets.

"For us, it's really important that the dealers are the ones, front and center, to work with the customer because that's where the relationship exists," said Cynthia Tenhouse, Lexus general manager of product and consumer marketing.

Lexus didn't identify the insurance provider. The other products come from Lexus' finance arm.

The Lexus Complete Lease package of services is similar to Volvo's Care by Volvo flat-rate subscription plan, which costs $600 to $700 a month for the XC40 compact crossover. The Volvo deal also includes a trade-up option after 12 months, a greater mileage allowance and ability to order the subscription online.

The Lexus program is aimed at attracting first-time luxury buyers who prize the flexibility of a shorter commitment and a simpler payment structure. It initially will be available in the Los Angeles, Boston, Chicago and Miami areas. Those cities have the highest lease penetration in each of Lexus' operating regions, Tenhouse told Automotive News at a media preview here.

"If we feel like there's an appetite for this, then absolutely we'll expand," she said.

Lexus executives have talked about the UX as a candidate for some type of subscription plan, which they say they still are formulating for a small pilot project.

Competing brands such as Cadillac and Porsche offer their customers the opportunity to pay a fixed monthly fee of as much as $3,000 for access to a range of vehicles with the privilege of swapping vehicles from time to time. But such arrangements are typically too costly for the UX's target customer, who Tenhouse said is typically a first-time "move-up" luxury buyer.

"I don't think we're convinced that subscription is the only way," she said. "There are different methods of ownership. So we felt like, for this buyer, convenience is the most important thing. Convenience and value are going to trump everything."

At the same time, she said, Lexus wouldn't want to make the short-term lease program "too appealing" in price.

"We want to know what's the threshold for this," she said. "It has to be priced right."

Lexus is pitching the UX at young, urban customers, or people with city-centered lifestyles, touting its tight turning radius; standard Apple CarPlay; safety features that can detect and brake for pedestrians or cyclists; and a mobile app that brings Amazon's Alexa voice-controlled capabilities into the vehicle.

Lexus has ruled out going below the $30,000 price point for its entry-level products and is sticking tightly to that policy for the UX. It will compete against crossovers from the three big German luxury brands — the Mercedes-Benz GLA, BMW X1 and Audi Q3 — and the Infiniti QX30.

The base model gasoline-powered UX 200, which will arrive at dealerships in December, starts at $33,025, including shipping, with an F Sport package adding $2,000. It comes with a 2.0-liter inline four-cylinder engine mated to a continuous variable transmission with a fixed first gear.

The all-wheel-drive hybrid model, arriving in January, starts at $35,025, including shipping, with the same available F Sport upgrade. It uses the same 2.0-liter gasoline engine, along with a pair of motor-generators for the hybrid system. The awd feature, provided by the second motor integrated into the rear differential, is expected to increase the take rate of the hybrid model.

Lexus said the UX 250h hybrid's EPA estimated fuel economy of 39 mpg combined is the highest of any crossover without a plug.

The UX fills a key gap in Lexus' utility vehicle lineup, which includes the popular RX midsize and NX compact crossovers, plus larger body-on-frame SUVs. This year, the brand finally gained a three-row crossover.