Welcome back to Buick Death Watch! It’s been a long time; we shouldn’t have left you without a strong tale of sales woe to complain about. And just like the Jesus of the New Testament, we’re going to start our tale with a parable.
Once there was a young woman from a faraway land in the south, and she wanted to buy her very first car. She drove cars from lands far and wide, including the Orient and the Land of Cortez. When she drove the Tiny Crossover of Three Shields, she found it to be the best of them all, for it was cloaked in leather and CarPlay, and its motor held the charge of turbines within its soul.
But the moneychangers in the Temple of Finance were not pure of heart. They offered her many baubles, and some of them were tricks of the devil himself — rebates for students of the Word of False Prophets, owners of cars from other lands, and more. The young woman did not qualify for any of these, but the moneychangers were devious, and they promised them to her anyway. And, lo, they delivered, giving her a total of $6,250 in rebates, but only if she would sign the parchment by the second day of the fourth moon. Thus, the woman drove away in the crossover, relinquishing nothing but $200 a month for the next three harvests.
Click the jump and I’ll tell you why all of this means Buick is hosed.
As we talked about in our last installment, Buick really only sells CUVs — the cars are irrelevant. Nearly 50 percent of all Buick volume is the Encore, which sets new sales records every year and is on pace to do so again in 2018 (or at least we’re pretty sure it is — thanks, GM, for refusing to release monthly sales numbers).
But there’s something rotten in the State of Korea. In 2018, Buick has been subsidizing the heck out of the Encore, to the point where most Encore buyers and lessees are getting thousands of dollars off. Right now, Buick is offering a whopping $5,000 off the oldest Encores in dealer stock — that could be as much as 20 percent or more of the purchase price. But back at the end of Q1, they were offering even more.
So let’s go back to our parable. Just like Jesus did, I’m gonna use that parable to teach y’all a little something. You remember our friend Luisa, right? She was with us at the New York International Auto Show, where she was looking for her first car. When she returned home, she took me car shopping, and we went and drove the Hyundai Kona and the Honda HR-V, and found neither of them to her liking. Directly across the street from the Honda dealer was a Buick GMC dealer, so we strolled in and checked out the Encore, which hadn’t even been on her list.
She loved it. It had a much nicer interior than the Hyundai and Honda entries, and the motor was significantly stronger. She loved the look of it, too — to her eyes, it looked much more upscale than the competition. It was almost too nice. “This is more car than I need,” she thought. But she enlisted the help of her dear friend, Bozi, to see what kind of deal she should try to get.
Bozi shot her back some numbers he had seen online from Encore lease shoppers, some of which were crazy — up to $6,250 off a lease if the buyer was:
- a college student
- an owner of a competitive model
Well, Luisa wasn’t a student (she already has a graduate degree), but she had taken some English language classes when she had moved to the USA from Bogota two years ago, and she still had a college ID in her purse. She had never owned any car, much less a similar car from the competition, but her roommate had a Mini Cooper parked at the same address. Ding! The dealer was willing to accept it.
And with a 52 percent residual after 36 months, all of those discounts made leasing a no-brainer. After some final haggling from her friend Bark (that’s me), which included a lot of screaming and yelling, walking away from the deal several times, and signing the final paperwork at 11:30 p.m. (thirty minutes before the rebates expired), she got her White Frost/Satin Encore Preferred with zero down and $200 a month over 36 months. It’s a nice car, and three months later, she’s loving driving it.
But should Buick have to subsidize its most popular car that heavily in order to move it? We aren’t talking about full-size trucks with huge profit margins. This is Buick’s volume model, the only model they have that sells with any frequency, and it’s one with very little room between invoice and sticker to start with. All of Buick’s sales growth can be attributed to Encore, and it’s not profitable growth. They might as well be selling Encores through Groupon at this point. Not only can they not sell them at sticker, they’re selling them, in most cases, below the actual market pricing of the Chevrolet Trax.
Just call Buick dealers what they are at this point — Encore dealers who take a loss on every car sold.
[Image: Mark “Bark M.” Baruth/TTAC]