The “American Dream” is based on the premise that anybody can rise from rags to riches in this country. As a society we aspire for the finer things in life and are taught from birth to be the best and want the best. Cars have always been an integral part of American culture so it should come as no surprise that luxury auto business is big business here in the United States for both domestic and foreign manufacturers.
There are approximately twenty-eight auto manufacturers that have a brand that targets a luxury car buyer here in this country. Until recently Americans had experienced such great prosperity in the last decade that all auto manufacturers were lured into believing that there was boundless upside for luxury vehicles. Manufacturers started expanding into categories they had never been in before. Porsche known for two seat sports cars launched an SUV and most recently a sedan. Volvo known for safety and boxy cars launched an SUV and a curvy convertible. Here at home domestic makers like Cadillac got into the SUV and convertible segments. The latter not with much success but with the plethora of releases there was bound to be failures across the board and certainly huge hits.
While manufacturers were rapidly churning out vehicles dealerships did their best to facilitate sales. The option of leasing versus buying became more popular in the luxury category and the government helped by offering tax benefits. The standard lease has a three-year term and once it expires you walk away and on to the next one while the dealer is left with the car.
A funny thing happened along the way. All those cars coming off lease started piling up on car dealer lots. What is a dealer to do? That’s a lot of inventory and money to have tied up in used cars especially when you are in the business of selling new cars. PROBLEM!
Solution: Toyota’s luxury division, Lexus created what at the time was thought to be another car selling gimmick. They essentially guarantee a used car in the same manner they do new cars. Lexus certified that a three-year old Lexus is just as good as buying a new one. They offered an unprecedented warranty extended for 2-3 years as well as financing and rates that were more appealing than the typical high interest rate that is charged on used cars. Most importantly the consumer will get to own this vehicle at a fraction of the original MSRP.
Unknowingly at the time, Lexus created a new way to think about buying cars that over the next years spread rapidly to the other auto manufacturers as it created two things. It revolutionized uses car sales by creating another solution to sell cars coming off lease and it opened the door to a new consumer they weren’t able to reach or speak to in the past, middle class America. You no longer had to be rich or affluent to be able to afford a Mercedes or any other luxury marquee brand. The pre-owned luxury vehicle was born and it has been thriving ever since. It helps Americans fill that American dream. You get a luxury brand on the cheap with the same brand cache of new and nobody has to know.
