Luxury auto market sizzles in August

If you think the auto industry is hot right now, check out what's happening with the luxury auto market. Sales in August were scorching thanks to a slew of deals attracting buyers seeking lower payments.

The business was so strong, luxury auto sales jumped 31.5 percent, almost double the 17 percent gain the overall auto industry posted in the same month.

High-End Rides Hot in August

BMW +45.7%
Cadillac +37.8%
Lexus +22.9%
Audi +21.5%
Mercedes +15.3%
Source: Autodata

Leasing driving demand

One reason luxury auto sales surged last month is the slew of leases being offered with low monthly payments. To quote one dealer, "I can put customers in a BMW 3 Series for $400 or $425 a month over three years. That's a deal customers can't turn down."

Here's another example:

Lexus is offering a 24-month lease on a 2014 IS 250 for $259 a month plus tax. The buyer puts down $1,995 and is driving out of the showroom in a luxury car for a very low monthly payment.

Leasing has long been a favorite tool by the luxury automakers to attract buyers. After all, instead of buying a car for $55,000, many buyers would rather lease it for $600 or $700 a month. Now luxury automakers are expanding their reach, targeting customers on the lower end of the market. Those seeking monthly payments under $500.

(Read more: Auto leasing surges to record high)

Luxury battle brewing

With Toyota determined to help Lexus win back the title of No. 1 luxury brand in the U.S., look for the Japanese automaker to be very aggressive marketing and pushing its models in the second half of this year.

August Sales

BMW 3 Series 8,791
Lexus ES 350 7,628
Mercedes C Class 6,161
Cadillac ATS 3,380
Source: Autodata

Right now, Lexus trails BMW by 17,000 vehicles and Mercedes-Benz by roughly 19,000 in sales this year.

The German automakers have waged a spirited battle the past two years to win the luxury battle, with BMW prevailing by slim margins. BMW is determined not to relinquish the title this year while Lexus is coming on strong.

(Read more: America's best drivers: Go West, study says)

Look for rich deals from the luxury players as we near the end of the year.

—By CNBC's Phil LeBeau. Follow him on Twitter @LeBeauCarNews.

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