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#1 of 109 The Value Proposition of Luxury Brands
Sep 15, 2010 (6:04 am)
People generally buy luxury cars because they like them and can afford them. But can they be justified from a value perspective, when you can buy an equally functional car for a lot less? The answer can be no, or yes.
How do we arrive at a "yes"? Let's take a simple comparison between a Toyota Camry and a Lexus ES 350. Both cars are on the same platform, but the ES 350 costs roughly 33%-50% more than the Camry. One justification for choosing the Lexus is that it ages better than the Toyota. What I mean is that a three, five, or 10 year old Lexus looks better (interior and exterior) than a Toyota the same age. When you drive up to someone's house or a restaurant, people who care at all about cars will focus more on the brand than the model year, and this, in many cases, will be reflected in the way you feel about yourself. If you drive up in a five year old Lexus, you look relatively successful. By contrast, no one even notices a five year old Camry. It doesn't draw attention to itself. It isn't the object of pity, but neither does it draw admiration that the owner has achieved some modicum of success.
The difference remains as the cars age. Compare a five year old Volkswagen with a 10 year old Mercedes or BMW, or a Chevy versus a Cadillac, and the older cars still manage to win more admiration.
Okay, I generalized, and there's lots of room for debate on this topic. I've told you the way I see it. You may say, "I just want safe transportation and the lowest cost-per-mile." Or, "I prefer to be annonomous, and don't want to be judged by the car I drive. Besides, the car doesn't make the person." Or, it's smarter to buy a new Accord than, say, a 1 or 2-year-old Acura." Fine. That's why there are so many choices on the market.
Have you debated between buying a luxury model and a more modest one? What factors did you consider, and what did you buy?
Do you feel similarly about the clothes you wear as the car you drive? Some do, and others don't.
What are your thoughts? Are luxury models worth the extra money to you?
#2 of 109 Re: The Value Proposition of Luxury Brands [hpmctorque]
Sep 16, 2010 (7:26 am)
We usually drive the 95 T Bird to church, but one recent Sunday, we drove our 94 Town Car. We were surprised to observe other parishioners "noticing" the TC. One lady asked, " When did you get that? It's beautiful."
#3 of 109 Re: The Value Proposition of Luxury Brands [euphonium]
Sep 16, 2010 (8:29 am)
An properly cared for old luxury car seems to age better than a normal car, and that old TC is likely a lot more appealing than a new cheapo car if it is pristine and in the right colors.
The 1989 S-class I once owned got looks and compliments all the time, and the unwashed think my 8 year old E55 is new.
#4 of 109 Re: The Value Proposition of Luxury Brands [hpmctorque]
Sep 16, 2010 (5:19 pm)
I think a luxury car is primarily a personal preference or an image thing. Certainly nothing wrong with that, and they are nice to drive and there is an intrinsic value to that. However, strictly financially, even if the depreciation rate is lower, the greater up front cash and the accordingly larger amounts of cash value lost through depreciation generally argue against it being the best purely financial proposition. I'm sure there are exceptions as there can also be for some popularly priced vehicles, but I think value and luxury tend not to be synonyms.
#5 of 109 Re: The Value Proposition of Luxury Brands [berri]
Sep 16, 2010 (5:35 pm)
Not to mention higher costs for servicing and consumables...although some makes are doing away with that (Jag comes to mind)
Lux is really only a good value when it is used...and then, you have to be very careful.
#6 of 109 Re: The Value Proposition of Luxury Brands [berri]
Sep 16, 2010 (6:51 pm)
If you view a car strictly as transportation, then I agree completely. The fact that higher trim models of mass market cars generally outsell the very basic ones suggests that most people consider more than just the transportation value when buying a car. Since people tend to keep their cars longer now than in the past, it's likely that how the car ages is frequently factored into the buying decision.
#7 of 109 Re: The Value Proposition of Luxury Brands [hpmctorque]
by MrShift@Edmunds HOST
Oct 15, 2010 (7:26 am)
To my point of view, if the "luxury" car does not excel in performance and styling, then it's a waste of money---too MUCH money for just poofier seats and some wood trim and a few gadgets and 2 inches more leg room. That doesn't justify an extra $20K or so.
In the "old days", when you went from a Chevrolet to a Cadillac, you KNEW it the moment you got behind the wheel. Now, I'm not so sure you notice much between a Toyota Avalon and a big Lexus.
#8 of 109 Re: The Value Proposition of Luxury Brands [Mr_Shiftright]
Oct 15, 2010 (9:18 am)
not so sure you notice much between a Toyota Avalon and a big Lexus
In the "old days" there wasn't much difference either between the LaSalle & Cadillac.
The Avalon is the LaSalle of Toyota.
#9 of 109 Re: The Value Proposition of Luxury Brands [euphonium]
by MrShift@Edmunds HOST
Oct 15, 2010 (9:28 am)
True but the LaSalle failed as a brand---that should tell us something about having too narrow a dividing line in "tiers" of luxury.
If I'm spending $75K on a car, I want it to a)dominate on the road and b) make the parking valet's eyes pop out. That's why a Porsche is worth the money to me, and a Lexus SC430 is not.
#10 of 109 Re: The Value Proposition of Luxury Brands [Mr_Shiftright]
Oct 15, 2010 (10:02 am)
Heck, in the 1960s you could clearly see the difference between a Pontiac and a Chevrolet. Some of those mid-60s Poncho interiors are very nice!