Production of the Cadillac CT6 may have ended in February, but there’s still a relatively healthy inventory of the large luxury sedan at dealers around the U.S. Unfortunately for dealers and for Cadillac, moving those units recently became a little more difficult.
Cadillac CT6 residual values fell several percentage points in May compared to April, making it more expensive to lease the large luxury sedan. Cadillac Society has learned that a 24-month, 10,000 mile per year lease on the 2020 CT6 Premium Luxury 400 carried a 73 percent residual value in April, but that figure slipped to 67 percent in May for the same vehicle and for the same terms. Both residual values are provided by Cadillac’s captive finance arm, GM Financial.
Incidentally, the 73 percent residual on a CT6 Premium Luxury was higher than the 69 percent residual on the base CT6 Luxury model, which is positioned lower on Caddy’s trim level hierarchy and, therefore, has a lower starting MSRP. As such, customers were able to lease the more expensive Premium Luxury model for less than the Luxury trim.
A residual value is the amount that the lessor assigns to the vehicle when it reaches the end of the lease. Set by the bank or financial institution issuing the lease, the residual typically changes every month. In broad strokes, when a customer leases a vehicle, he or she pays the difference between the vehicle purchase price (MSRP) and the residual, divided by the amount of months of the lease (plus an interest rare – the money factor – as well as some fees). A higher residual value results in a lower payment, since the vehicle will be worth more at the end of its lease, while a lower residual causes the payment to be higher.
Though it’s unclear why Cadillac CT6 residual values experienced such a dramatic decline in April, we imagine that the ongoing Coronavirus pandemic has something to do with it. Having caused massive disruptions to all levels of the auto industry, the COVID-19 outbreak is expected to make automakers jump through hoops in helping dealers sell new cars, including offering substantial discounts, incentives and financing offers. The latest estimates peg new car sales to be down roughly 50 percent in April in the U.S. Meanwhile, used car values are also on shaky ground, reaching their lowest levels in years as demand dries up and dealer inventory increases.
It’s worth noting that Cadillac CT6 residual values improved during the vehicle’s lifecycle. When the large luxury sedan first launched for the 2016 model year, ALG assigned it a 46 percent residual for a 36-month / 10,000 miles per year lease. The same vehicle today carries a 58 percent residual value in May 2020. The same model in April had a 63 percent residual.
After some wavering, production of the CT6 for the North American market ended in February at the Detroit-Hamtramck plant in Michigan, leaving Cadillac without a large sedan in its product portfolio. The biggest Cadillac model currently in production (COVID-19 idling notwithstanding) is the CT5, which is roughly the size of the last-gen CTS. Cadillac President, Steve Carlisle, told Cadillac Society in February that a replacement for the CT6 is currently not planned, but if such a model does come to market, it would “most likely be electric.” The only facility currently producing the CT6 is Jinqiao Cadillac plant in Shanghai, China. Units of the CT6 built there are sold exclusively for the Chinese market. There are no plans to export the Chinese-built CT6 to the Americas, according to Carlisle.