while cars still come at all price points, reading about the new NSX going up over $200K and the LC rumored at $150K, and reading the rants that it's too much i began thinking about pricing in general.

as our society 'splits' wealth more and more, with the vast majority of americans struggling to pay bills, raise families, and, live the 'american dream', and the rest having STAGGERING wealth, i feel that cars are tending to do this more also, with seemingly more and more 'value' models, and also more and more cars with irrelevant 'starting' prices and endless options driving out the door prices into the stratosphere. but for those with huge incomes or with accountants using the car leases as write-offs, the cost isn't that big a deal, and car makes know it, so they're likely to keep bringing out models at HUGE prices.

your thoughts?

 

I just went to a Porsche dealer ship website, and their first page are filled with 200k+ 911s and panamera turbos, didn't know Porsche are getting so expensive nowadays :/ I thought average Porsche are around 100-150, only special few are over 200+! Guess people who can afford them don't care about 50k more.

I agree the higher ends cars prices are getting out of hand that only very very few people could afford them.

 

they're only 'getting out of hand' for the vast majority that can't afford them, but i think the higher end auto makers are realizing that since THAT market is 'lost' they might as well cater to grabbing more and more $ and profit from rich customers with more and more options, pampering, exclusivity, etc.

it's pretty incredible to think bugatti sold 450 veyrons at a million+ a piece. i suspect those that bought them didn't think twice about the money.

there is also an aspirational market who are ok leasing a car for $1000-$1500/mo. figuring that $15-20K a year makes them look good at the country club and is obviously a nice ride! but again, the vast majority of people could not spend that kind of money.

 

i think that's very true, the market is being split up pretty good and the gap is widening just like how the economy is.

the interesting thing is even for luxury brands, they are splitting up as well in order to hold the ultra rich while trying to scoop up as many "low end luxury" market as possible. just like how we see all the 1 series, cla, ct, a3. these companies realize that they cannot survive if they just hang on to the really rich ones.

10 years ago with lexus, the IS was a 30k car and the LS was a 60k car. now the CT is 30k and the LS is 90k and hybrid over 120k. that's a much wider gap than before.

affording the car is one thing, to me there is still the value part. i think it has a lot to do with the fact that i went through the old era (early 2000s) so now i find it harder and harder to justify the gap. me being able to afford say the s class, doesn't make me feel i am getting enough value out of it. that's the problem i am facing.

funny you brought up veyron, indeed i am pretty sure most owners don't feel anything buying the car. i still remember one survey said that on avg veyron owners have around 80 cars. most of us don't even have 8

 

I'm not sure I buy the "wealth chasm" argument because the aspirational market is the biggest one out there. I recall a report from not too long ago that around 60% of S-Class and 7-Series buyers lease. Given the type of people I know who drive those types of cars, that was actually lower that I expected. But still, that should tell you everything you need to know.

I always was a bit skeptical about "luxury" cars and brands especially after a pretty lousy experience with my first foray into the segment - a C-Class that was not particularly luxurious and even less reliable. It took Lexus to really get me into it the segment. And even now, I'm really not sure what direction I'm going to go in. For example, the GS-F doesn't represent particularly good value to me.

The way I look at it, many people buy an A/CLA/whatever because they want the cachet of a MB logo on the hood and will spend as little money as possible to get it. It's not too different to how many people buy an S-Class because they want the cachet of having the "top" MB, hence the existence of things like an S320. If anything, it's the downmarket "luxury" that widens the gap as it makes cars more accessible and then people who just want the brand cachet follow the trend downmarket too. Same as how the California cannibalized 458 sales.

 

whether leased or purchased, by decidedly wealthy people or those 'doing well' (or posers, lol), i've no doubt mb makes a load of money on the s-class.

my point is, since higher end vehicles are VERY profitable, and since wealth is now more 'split' than ever (with the middle class pretty much disappearing), i think car makers are going to offer more high end and personalizable vehicles than ever.

i bet in 5 years even hyundai/kia will have a vehicle well into 6 figures.

 

I completely agree

Wher the big boys have been really smart is in putting some down market models like the 1 series to have something at a price point that many folks can touch and then extending upward.

I remember being shocked when I configured a 6 series grand coupe a couple of years ago and it approached $150K

One of my first professors in B school said there is a lot of money to be made if companies give me what I want.

The high end rides with lots of personalization opportunities is just what he was talking about.

 

I don't think you are correct at all. It's never been cheaper to own a nice car, and cars have never been better. You have great lease and financing option, combined with free maintenance, longer warranties, and just great overall build quality.

Sure there are car that are extremely expensive, but there were always those. Its just today there are more of those extremely expensive models because we have more wealthy people.

But for an average Joe things are pretty good as well. When I came to USA in 1993, from my observation most cars in NYC were horrible pieces of junk, with red tape over broken tail lights, dents, peeling paint, etc. Today its a rare sight to see a beat up car anywhere in NYC, and most middle class neighborhoods are filled with premium cars.

Thanks, Obama!

 

I certainly wouldn't bet against that prediction, though some of that will probably depend on whether Hyundai can successfully get their new upmarket Genesis division launched. I think the sooner and more successfully the Genesis division gets rolling, the more chances of seeing that happen. I can't imagine most people going into to a traditional Hyundai or Kia dealership and spending more than 100K.

Some not-so-high-end vehicles can also make money. Every F-150, Silverado, or Ram sold, even in the lower trim-lines, makes its manufacturer a nice profit, though, of course, the highest profits are on the high-zoot models like the F-150 King Ranch/Harley-Davidson models and the Ram Laramie.


Or, maybe, despite the fact that they are well-heeled, they simply don't care what other people think at the country club. A perfect example is a retired 4-star General who regularly attends my church.....an ex-Army Chief of Staff. One of the most powerful military officers in the country (presumably one of the most highly-paid)...and what does he drive? An 11-year-old 2005 Subaru Forester.....a cheap base-model Forester at that. His wife has a 2 or 3Gen Lexus ES300 dating back to the mid or late 1990s (I forget exactly which year).

(BTW, when he bought that Forester, he had asked my recommendation for an ideal inexpensive winter car...he's been satisfied with it ever since, and seemed to avoid the head-gasket problems many older N/A 2.5L Subies had)

 

You're probably already aware of this, but, if not, you'd be surprised at the number of college professors driving either Volvos or a Toyota Prius. Both have developed stereotypes as school-marm vehicles.

 

I know a lot of people that lease high end cars simply because they want to drive new cars every 1-3 years, and don't want to deal with resale of such car, and spending 15k-25k a year for it. Also tax advantage is added benefit. This is complete opposite with people leasing lower end luxury cars, I know plenty of my clients getting 320i, CLA250, C300, A3/A4 because they want the badge, and numbers of them admitted to me that's exactly what they doing. They went and bought the base model with lowest payment, so they are now driving MB/BMW/Audi/Lexus.
On the other hand, all those ultra high dollar models bring glory to the brand, making people getting the cheaper models feel better

 

In the U.S., though (I'm not sure about tax laws in other countries), one can usually only deduct the lease-payments if the vehicle is regularly used in business or on the job. If the vehicle is used in charity work or as transportation getting to and from charity work, 14 cents a mile for operating costs can be deducted on Federal taxes...but that applies to any vehicle, not just leased ones.

 

I don't mind some of these crazy new high prices, but I feel the car has to have qualities to earn that price. Sometimes I think auto brands are just making cars and slapping on a high tag just using the logic people will buy it anyway because there are a few others out there who are selling some expensive ones.
One good example is the Acura RLX. For what you see and get, the price should be in the low $40's. I fear the NSX has some of that mentality, but I hope I'm wrong.
As for the new LC, maybe many (including myself) were expecting a SC replacement, which left us in the $55k range. If I were Lexus, I would have continued on with the LFA and brought in a more affordable SC. The LFA ran way too short of a life, where demand was still heavy. Now they have a problem not having an expensive/halo car. Pricing things high like the LC and SC, to fill in some of that gap, is not a legit way of branding your lineup.

 

MM,

I am overly familiar with the millionaire next door approach where those who have dough do not up their consumption habits in line with their increases in income/wealth.

I am just saying that a lot of folks with coin have been jonesing for higher end product and have been happy to fork over for it.

In 91 an NSX cost more than my annual salary. The new one will only be about 25% of our 2016 household income, which points again to the income disparity point in the original post.

 

I wasn't making any comment on the profitability of the S-Class - only on your assertion that wealth inequality is what is driving up prices of high-end models and resulting in the introduction of attainable models. If 60% of even the high-end models are leased, I just don't see how that can be a reasonable argument. Don't forget about inflation either. That 85k W220 S500 from 1998 is $124,000 in 2015 dollars (CPI).

BTW, I was able to find a blog post referencing the study (from 2011) than I read - it reports 57% lease rate on the S-Class and a staggering 66% on the BMW 750. Lexus LS was down at 40%, to put things in perspective. Either way it blows my mind that so many people are leasing cars. Absurd to me really.

http://blog.ihs.com/dont-believe-everything-you-see

Sure, but that doesn't change the fact that there are huge numbers of aspirational buyers out there. One of my long time business partners still drives an old, beat up Camry and he is far wealthier than I am. That doesn't mean that for every guy like him there aren't 50 guys out there leasing S-Class' they can barely afford to pay off. BTW, even O-10 doesn't make that much especially if retired before 2004ish (pension was usually capped at 50% final pay before then). It wasn't until they were trying to retain officers during the shortages after the Iraq #2 and Afghanistan campaigns that they boosted pension pay. And even then, that's not the class of people I'm assuming are typically discussed when talking about "STAGGERING wealth" as in the OP.


I'd think that example would demonstrate lack of systemic income inequality.