• Feb 21, 2009
Luxury car sales are off by at least one-third compared to last year's numbers, and the end is probably not in sight. In past recessions, the wealthy have been insulated by their money, but not this time. Real estate and banking are responsible for a large amount of the financial pickle we're in, and as those sectors get walloped by reality, the luxury cars typically purchased by agents, brokers, and bankers are languishing.

Those that haven't lost their shirts are also either holding on to what they've got for now, or buying something less ostentatious. While you might miss out on a certain brand cachet by trading a Mercedes for a Prius, it's a different kind of status symbol, just the same. Besides, why bother paying so much for a premium car when a loaded "normal" vehicle can be had with features that were once the exclusive realm of luxury cars? A desire to be less flashy, a newfound concern about the environment, and a beat-down portfolio have converged to generate the perfect financial storm, killing momentum for luxury car sales. Things might turn around a bit as environmentally conscious premium cars become available. There are the new diesels, and Lexus will have its own dedicated hybrid when the HS250h goes on sale this fall. Before any of that happens, however, current inventory will have to be cleared, so now might just be the perfect time to pick up a luxury car at a steep discount.

[Source: Detroit News, Photo: Niello Porsche]


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  • 25 Comments
      • 5 Years Ago
      ferrari and lamboghini both had record sales last year.
      • 5 Years Ago
      The lower classes have absolutely no concept of brand image. 30,000$ will either get you a fully loaded Honda, or a bare basic BMW.

      The BMW will land you the job interview. The Honda won't.
        • 5 Years Ago
        Hopefully you already have a job if you're buying a BMW.
      • 5 Years Ago
      Generally speaking, when discretionary money from very wealthy folks begins to flow in directions outside ultra lux vehicles, that means those folks understand we are in the midst of a downturn that is going to last a long time.

      People that can afford these cars got rich (generally speaking - don't come at me with the exceptions) because they are smart, had an idea, had a plan, etc. If they are retracting it doesn't bode well for the near term future and our economic well being. This recovery is going to take awhile.

      The fact people at this income level are retrenching, as is the market, after two "stimulus" bills, tells me the current government approach is not going to work. At least as far as the market is concerned and the market is a very honest economic broker.

      In reading this article we need to look beyond just the fact sales are down and ask, "Why are people that can afford these vehicles not buying them?"
        • 5 Years Ago
        The government's stimulus is already working, 14,000+ teachers in NYC were about to get the axe, not to mention the entire class of NYPD recruits that were about to be let go, are back on the job. Public works projects across the that were frozen are now moving again.

        Those of you who use the financial markets as a gauge, good luck, it's not coming back anytime soon. I hope most of those arrogant bastards lose as much as I lost in my IRAs, 401Ks etc. To the whining assholes in the financial markets that are peed-off because the govt. didn't buy up their bad business deals. SCREW u.

        More of the large financials are going to go under, good riddance. The top 10 people at the SEC should be executed by firing squad. Their negligence is the is the a major factor in the lack of confidence in the markets.
        • 5 Years Ago
        I dunno. I never bought a fancy car to impress my neighbors and I can't see buying a lesser car to impress my neighbors.
        • 5 Years Ago
        JSJS---
        Here, here!

        Ronnie---
        The most blatant example of what you're describing is with the immediate predecessor administration, which not only gave no-bid contracts out to companies that clearly enabled an election that probably never would have happened without them (the Bush Rangers) but, frankly, had a Vice President that, 2 years into his term, was STILL receiving a huge paycheck from Halliburton (and explained it as merely being a deferred bonus, which is sort of like saying that an affair with an "ex" is merely a deferred sexual encounter).

        Sorry,... but, merely one month into a new administration and facing problems that nobody in the past 2 generations of Americans have had to deal with, politics as usual needs to be checked at the door... better yet, those that are so quick to engage in this should probably take a close look at this "politics as usual" and see where it's gotten us.
        • 5 Years Ago
        The government's stimulus is already working, 14,000+ teachers in NYC were about to get the axe, not to mention the entire class of NYPD recruits that were about to be let go, are back on the job. Public works projects across the that were frozen are now moving again.

        Just what we need, thousands more public employees whose unions bribe politicians into giving them salaries and benefits that are significantly better than anything available in the private sector.

        Did you know that there are now more Americans who work for government agencies than work in the manufacturing sector?

        Did you know that government workers have a 3% unemployment rate, the lowest of any "industry"?

        Think of it not as a stimulus plan but rather a means to provide jobs to those who control the Democratic party.
        • 5 Years Ago
        @LS2LS7

        I'm assuming that a lot of people feel guilty to be doing good in the current climate.

        Or maybe modesty is in; show and glam is out.

        This could have contributed a lot to Genesis sales.
        After all those who buy Priuses want to say: look at me! I want to save the earth so I don't mind driving a humble Toyota appliance.
        • 5 Years Ago
        As the article mentioned, a lot of people who still have a well-paying job and/or assets don't want to show off too much.

        If you're the owner or principal of a company, and you just had to lay people off or deny raises, it doesn't look too good if you roll into the parking lot in a brand new Benz or Bimmer.

        Same goes for your neighborhood. Suppose you're gainfully employed and your mortgage is manageable, but your neighbors are struggling or have been foreclosed upon. Do you really want to gloat with a new ride in the driveway? Sure, some will, but I think most of us have better sense than that.

        I just think people -- even those with money -- are being sensitive to the times.
      • 5 Years Ago
      I would think the market for cars to rich people wouldn't be affected as much by substitution (Mazdas instead of Audis), but by people just delaying purchases.

      If you're a big wheel and "drive new every two" isn't it really easy to simply delay switching to a new car for a bit? Even if you only delay it only one year (keeping your car three years), it can cut down sales dramatically.
        • 5 Years Ago
        ^^ Even though there will be a few more factors involved, I concede.
        • 5 Years Ago
        While you are partially true, the thing that autoblog wants to point is that people shopping in the extreme high-end category (Ferrari, Lambo, Maserati) will move to M, AMG (as evidenced by their record sales in '08 FY).
        • 5 Years Ago
        Agreed.
      • 5 Years Ago
      While I don't have the numbers for regular cars, it seems they are down 40%, so it doesn't appear that they are taking sales away from any other demographic right now.

      I'd be willing to bet that the 20something crowd of mortgage brokers are responsible for a big chunk of the lost sales of luxo cars. The free money stopped falling from the sky and the ones I know of at least, were sent crashing back to reality when they couldn't pay the bills anymore and lost everything. These bozos were apptly portrayed in the film Boiler Room, only in the movie it was garbage/fake stocks instead of garbage home loans that they were screwing the middle and lower class with.
      • 5 Years Ago
      It's the "wealth effect." When monied people added up their assets including their house (or houses) and their financial assets, the big numbers they enjoyed a few years ago became an incentive to buy whatever they wanted. After all, they were ahead of where they expected to be in their retirement planning, or if they were already retired, they had more bucks for indulgences.

      Now, there's no place to hide! Stocks are down over 40%, houses are worth much less and bonds, cash, and their equivalents, while maintaining their value, don't earn much of anything if you choose to invest safely and avoid the Madoffs of the world.

      The problem is that as more people try to save, the income stream decreases and we all save less--especially when masses of people lose their jobs which results in a further reduction of spending.

      The good side of this is that if you still have plenty of money to spend, the deals out there are very good. But is it a great idea to be showy when so many people are hurting?
        • 5 Years Ago
        Agree with that completely. Many of these people are not going to return to buying these cars soon. They perceived themselves as rather rich and so spent like it. Now they perceive themselves as rather poor and so are spending like it. Many of these people's perceptions were wrong before, but perceptions are as powerful as reality sometimes.
      • 5 Years Ago
      Maybe Hyundai's timing with the Genesis wasn't that far off. I've seen loss-leader Genesis ads for $29.999 for the base model, and I'd have a *really* hard time paying thousands more for a Lexus ES or GS.
      • 5 Years Ago
      "Besides, why bother paying so much for a premium car when a loaded "normal" vehicle can be had with features that were once the exclusive realm of luxury cars?"

      Bingo. That's my line of thinking. I love cars but when it's time to buy one I'd just as well buy a LOADED Mazda6 for about $36K Canadian instead of a starter A4 at $38K Canadian. That 6 will have as much equipment (more, actually), almost as much power but will be cheaper to insure, repair, maintain etc.

      That is ABSOLUTELY not to take anythign away from luxury brands...I lust for Porsches and S5s like any other guy...but it's all about contentment.
        • 5 Years Ago
        Good point. In your case, you have no choice but to spring for a premium vehicle.
        • 5 Years Ago
        I was just going to reply to that same question with an opposing viewpoint.

        I buy luxury cars because of the way they perform. My requirements are simple: RWD, great handling, copious amounts of power, relatively compact, seating for four (or more). The fact is that the selection of non-luxury cars with those characteristics is small. Roadsters are out or the question because they lack rear seats. The G8 and Charger are too big. This leaves a muscle cars (Mustang/Challenger/Camaro). I find the Mustang and Challenger, while great cars in their own right, don't handle the way I want. I haven't tried a Camaro yet of course. Plus, I prefer a four-door car unless I am buying a convertible, so that would really leave only the Mustang anyway. I figure that if the top does not go down, for me, there is not much compelling about the two-door.

        If there were non-luxury cars that matched my needs I'd be sold, assuming the price differential from the luxury equivalent was there. If there were a RWD Fusion or Mazda6 or Aura or G6 with a 300hp+ V6 or small V8, I'd at least go test drive one.
        • 5 Years Ago
        @mKM3

        Hyundai Genesis? Big RWD car, looks decent, good spec.
      • 5 Years Ago
      I assume this is where Hyundai comes in (in terms of bargain-priced real luxury vehicles).
      If you think about it, you could get almost any midsize sedan for a relative bargain with all of the luxury features (interior, not necessarily performance) of a comparable entry-level luxury sedan. Honda Accord vs. Acura TSX/TL, Toyota Camry/Avalon vs. Lexus IS/ES, Mazda 6 vs. [insert here], Nissan Altima vs. Infiniti G37, Ford Taurus vs. Lincoln MKS, etc.
      • 5 Years Ago
      1. no matter how much income you have, there are always financial issues. they are just simply at a different magnitude than those who make less.

      2. I would also say that the sales are dropping likely because of the exact reason so many folks are hurting...a large number of these cars were bought by people who never could really afford the car to begin with. I think it's funny that I drive down my nice suburban street and see a hummer and a Benz in the driveway of a house that is worth $250k. way to put your priorities in place. especially when they have kids about to enter college and still have a mortgage. stupid.
        • 5 Years Ago
        Agreed... it just so happens that, as with the housing boom, much of the Luxury Car/Truck boom was really a house of cards, with the growth of Near Luxury (counting towards so much of the growth in volumes for Luxury brands) being anything but traditional "luxury". Not coincidentally, this same phenom is part of why you saw SUVs (even fairly plebeian and ubiquitous Explorers) regularly hit the mid $30k's... They were part of the house of cards and, perhaps, this is as much a reason why these segments (not just Full Size trucks) have dropped so greatly, as well, eh?

        Not trying to beat a dead horse but... take those same people and put them at risk, financially, as so many are now and, suddenly (as you point out in your own suburban subdivision), they're having, not just second thoughts but, severe need to retrench. And, in that kind of scenario, Luxury cars, even if they're the "entry" kind (as well as those $35K non-Luxury SUVs), are truly dispensible.

        I always found it interesting that, when talking about "affordable Luxury" or the "democratization of Luxury", we have spoken in the industry of $30,000 as being reasonable when (in fact), in shopping for something myself, I find the monthly payments to be gagging in size... The "Payment Shopper", as a phenomenon, was alive and well in Near Luxury (and SUVs), if only to float (or is it "bloat") sales volumes.
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