Leasing has long been the preferred method for selling high-end cars. After all, even the wealthy who can afford to buy a $60,000 or $70,000 car, don't care for the idea of paying that much in one lump sum.
What has changed is that luxury automakers are now realizing that they attract a broader base of customers if they can offer entry-level models for under $400 a month. Once the customer is locked in, the luxury brands believe the quality of the cars and the pampering delivered at luxury dealerships will keep customers coming back.
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Caldwell understands the logic, but wonders if the luxury automakers are watering down their brands with low monthly payments. "The real concern is that some customers spend $70,000 on a certain model and then they see a lot of other people driving around small cars from the same brand. Then it doesn't feel so exclusive," she said.
The alphabet soup battle
When Cadillac rolled out the ATS late last year, Mark Reuss, president of GM North America, predicted it would be a hit with buyers. He was right. A year later, the ATS is currently the best-selling Cadillac sedan in the U.S., with more than 28,000 sold this year.
The ATS (starting MSRP $33,095) along with the redesigned Lexus ES (starting MSRP $36,470) and the brand new Mercedes CLA-Class (starting MSRP $29,900) join a highly competitive entry-level luxury market. They're getting attention while the BMW 3 Series (starting $32,965) and Mercedes C-Class (starting MSRP $38,200) remain the two best-selling models.
With more models vying for the attention of buyers looking to spend less than $40,000, it's not surprising some mass-market nonluxury sedans like the Nissan Maxima (starting MSRP $31,000) have seen sales drop this year.
Caldwell said the growth in entry-level luxury makes it tougher for higher-priced nonluxury brands, "You know, a lot of buyers are thinking, 'Hey, for a few more bucks I can get a Mercedes or BMW, so why not?'"
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More luxury coming under $50,000
Given the success of broadening their lineups with cars that start under at $50,000, don't be surprised that automakers are planning to roll out more models in that price range. While there are some raising concerns about a flood of leased models hurting residual values two or three years from now, the leasing market remains very strong. The demand is there, especially in certain markets like Miami and Los Angeles where the majority of luxury models sold are through leases.
"I think this will continue for a while," predicted Caldwell. "These are still aspirational brands, and if people can get into one of these cars at the right price, they'll do it."
—By CNBC's Phil LeBeau. Follow him on Twitter @LeBeauCarNews.
Questions? Comments? BehindTheWheel@cnbc.com.
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