Cutting Back: Wealthy Car Buyers Trading Down
Call it a sign of the wealthy in America being a little more cautious. Or call it a case where high-end car buyers are trading down so they don’t spend as much for luxury cars and SUVs. Whatever you call it, it is clear sales of new models costing more than $75,000 have slowed down.
J.D. Power’s Power Information Network has tracked sales for the first half of this year and broke them down based on the transaction prices. In other words, what did customers actually pay before they drove off the lot.
According to J.D. power, here’s the data:
Under $25,000 (up) 8.3%
$25,000-$49,999 (up) 14.5%
$50,000-$74,999 (up) 19.1%
Above $75,000 (down) 3.7%
Industry: (up) 11.5%
Wealthier Customers Trading Down
After getting the data, I called a number of dealers around the country to get a sense of why sales of higher-end luxury vehicles have slowed.
Dealers say their customers are still buying luxury cars and SUVs, but instead of paying $75,000 or $85,000 for a particular model, they are moving down and buying a similar model but for $10,000 or $20,000 less.
For example, look at sales of the Audi A8, A8L and S8 Quattro. In the first half of this year, sales of those cars are down 11.8 percent according to Autodata. By comparison, Audi sales overall are up 15 percent, outpacing the industry.
Another example is the Mercedes E Class. So far this year, retail sales of the E Class are down 5.7 percent while sales of all Mercedes brand models are up 16.8 percent, again growing faster than industry sales.
Finally, there’s the Lexus LS 460. According to Autodata, LS 460 sales this year are down 28.9 percent , but Lexus sales overall are up 21.3 percent.
Why are customers trading down? Some of it is because of the economy and even wealthier car buyers are more cautious. So instead of spending $80,000 they are more likely to spend $50,000 or $60,000. And given the technology and styling put into many of the refreshed “mid-level” luxury models customers don’t feel like they are trading down.
For example, compare the BMW 5 series ($47,795) and BMW 7 Series ($71,895). Clearly, with the 7 Series, BMW buyers are getting a slightly larger sedan. An updated version of the car is rolling into showrooms this summer, but to quote one dealer, “The 5 series is so nice it made it very easy for the returning 7 series customer to downsize without a lot of compromise.”
That ultimately may be what the slowdown in luxury cars over $75,000 is all about.
-By CNBC's Phil LeBeau
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