Lincoln is future-proofing the residual values of its vehicles by curbing sales to fleet businesses. In the short term, the move is hurting monthly sales figures.
The plan is part of Ford CEO Jim Hackett’s strategy to improve Lincoln’s operational fitness, (subscription required) reported on Sunday. The fleet sale cuts will see fewer cars delivered to rental companies and less of a focus on company vehicles. The brand still plans to support livery services as part of its commercial business, however.
“What happens is (fleet) cars come back in six to 12 months. That’s problematic on our residual values because that’s when all the depreciation occurs. The longer they stay out, the better,” Robert Parker, Lincoln’s director of marketing, sales and service, said.
Lincoln sales dropped 2.1 percent in March as executives implement the strategy.
Lincoln’s move comes as a pair of new vehicles ready for launch. The forthcoming 2019 Nautilus and refreshed 2019 MKC, as well as the 2018 Lincoln Navigator released last year, should all see the long-term benefits of greater residual values in the future. The brand’s rental sales are already down 27 percent through Q1 of 2018, according to Ford data.
Part of the long-term residual value strategy is due to changing consumer habits. More millennials prefer to lease a vehicle rather than make an outright purchase. Residual values become even more important with that consumer shift.
Now, Lincoln says its brand strategy is a marathon, not a sprint. The 2019 Lincoln Aviator will be the luxury brand’s next act as the first vehicle built on a dedicated new platform, codenamed D6. In addition to the Aviator, another SUV is due by 2020, and four additional new Lincolns will arrive after 2020.
Lincoln will also roll out a pilot for a used-car subscription service this year in select markets.