Today's Morning Shift reported that VW's new strategy will be to increase sales by bringing more new products to market, while reducing the model refresh time-frame from 5 years to 3. Many of our astute readers rightly pointed out that product turnaround time isn't the problem for VW, it is simply that the brand is charging too much for what they are offering. So when smart shoppers crunch the numbers, often the competition gets the sale.
"I think the shortest answer is knock off about 3-5% of the price of each model and you'd see more go out the door.
When I priced out a Jetta against an equally equipped Ford Focus, I came out way ahead on content for money, so I went with the Focus. Ford also has/had better financing in general."
Matt mentioned that the financing isn't discussed much though he knows of a few people who get good leases on VWs. It is true that VW does offer some decent lease incentives, but when you examine the details and compare it to the competition, VW's value falls short. Let's take a look at 3 compact sedans.
First up, our favorite, the Mazda 3 (MSRP $18,790 including destination). Current lease offer is $159/mo for 36 months w/ $1999 down
Next is the Honda Civic LX (MSRP 19,980 including destination) for those looking for something beige and reliable- $159/mo for 36 months and $1999 down
Finally we have the VW Jetta S (MSRP 17,715 including destination)- $159/mo 36 months for 2349 down.
As I have mentioned in a previous post about leasing, residual values play a large role in how lease payments will be calculated. The short version is, the better the residual the closer the gap between the sale price of the car and the buy-out, thus lower payments. Of the 3 vehicles here the Jetta has the lowest residual value retaining only 47% compared to the Mazda3 at 59% and the Civic at aprox 60%.
Also, all of the lease details stipulate that dealer contribution will vary and may affect the lease payments however, VW specifies that for the Jetta to maintain that payment of 159/mo it requires dealer contribution of $1,622.52. Now for a dealer to knock 1600 off a 17k Jetta is well within reason, but it is important to note that Mazda and Honda do not specify that their dealers take almost 10% off the top to achieve those lease figures.
We have already discussed many times VW's lacks the "European premium" feel of the previous generations. Therefore, for VW to require the highest downpayment for a vehicle with the lowest MSRP and the most anemic and least fuel efficient engine of the bunch is not a recipe for success. I also realize that these comparisons are of minimally equipped base models that are difficult to find on dealer lots, however when you scale the cars up with similar options the value for your lease payments is still relative.
Even though many of you will not lease the purpose of this post is to illustrate with real numbers VW's lack of content for your dollar. If VW wants to remain competitive in the lease market there is nothing they can do about those residual values (they are set by a 3rd party) however as Monsterajr and many of you suggested, they can drop the price. Or...VW can offer a higher quality product for your money. Now does VW have some standout offerings like the GTI and TDI models, but those cars have very specific markets. If the automaker wants to hit lofty sales targets they need to play-hard against mainstream offerings. If VW can't hold their own the lease game, they certainly won't win when it comes to purchases.