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High End Luxury Cars

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  • merc1merc1 Posts: 6,081
    I'm done with the what if scenarios. Lets stick to the cars, where actual, real life data can be used.

    "We can see this principle in operation in the real world. I recall you posting that in some years the S500 outsells the S430. How can this be if your theory is correct, namely that higher priced
    products have to undersell lower priced ones, even if they offer “more” of something. My answer:
    that when there is more content, which in this case means larger engine, better standard
    equipment, more prestige associated with the S500 badging, then as long as that content is priced appropriately the S500 can sell in similar units to the S430. Get it?"

    Got it. This was clearly shown just recently in the C&D comparo, for 87K (S430), the overwhelming majority of MB buyers would pick a S500, which would give you more for that 87K. Thats the first reason for the S500 outselling the S430, the next would be that once you've reach the point of looking at a 73K car, a 80K one isn't nearly the stretch between a LS430 and a S500, as you try to imply, the cars have a huge base price difference. Only a LS430 Ultra(?) buyer at 71K could think about looking at a 73K S430 or a 80K S500, the buyer looking at the base LS430 at 55K, isn't going to just say, oh the S500 is more prestigous, let me shell out another 25K. To assume everyone can make this kind of leap is pure fantasy. I'm sure there are some LS430 buyers that can afford a Maybach and everything else in between, but the average one can't. Not all S-Class buyers could either. Note: Not saying this the same kind of price leap, just using this for emphasis.

    Question: what does any of this have to with Mercedes' sales vs Lexus'? Not much. This has nothing to do with, again what you've ignoring here, that most of Mercedes' cars are still priced higher than Lexus'. What Mercedes models outsells another is completely irrelevant in this conversation.

    "Or take another example from the MB world. In some years at least, CLK coupes outsell the C
    coupes (per autosite.com). And in some years, E sedans outsell C sedans."

    Lots of things wrong with this. First of all the CLK has 6 models, the C Coupe has only 2, and
    try as they might, MBUSA, will never tell you that all C Coupe sells are of the C230 Coupe, I have never, ever seen a C320 Coupe in a lot or on the street. Secondly we're talking about a completely different price range and buyers here. The C Coupe is bought by first-timers to the MB brand, the CLK isn't.

    " Not consistent with your theory that higher-content, higher-price products can’t possibly outsell lower-priced products. But consistent with my theory that higher-featured products, if priced appropriately, can sell in the same or even higher quantities. Again, prestige is just like a feature in that people will pay extra for it."

    You're talking about within the MERCEDES-BENZ lineup, not MERCEDES vs LEXUS. Again, you're reaching for another point that has nothing to do with what you and I have been talking about here. I could have told you the very same things you've posted, within the Mercedes lineup. No news there.

    We all know that people are willing to pay for a car for whatever reasons, prestige, performance, whatever, but you've continually missed is they only do this if the CAN DO IT. Your theory misses this by a country mile, you're assuming that everyone can afford to buy whatever they want.....this is so not true. A S500 could be the most critically acclaimed, prestigious car ever made, but unless you have 80K it doesn't matter. A LS430 is much cheaper, by about 25K, and you think that doesn't prevent a car like the S500 from selling more units you're sorely mistaken and clearly not dealing in real world.

    "And as long as a product has more content, it can command higher prices and still sell the same number of units…or higher units…than the lower priced competition."

    So I take this as you saying that say a SL500 and a S500 offer more content than a SC430 or a LS430, I could have sworn you were the same person that said these cars didn't even come close to justifying their price premiums over their Lexus competition. You can't have it both ways, they either do or they don't. Since you've admitted that Mercedes either sells as many or outsells Lexus' cars then I guess this statement was wrong from the start:

    "And I'm saying that the buying public, on balance, doesn't feel the high prices are worth it...which is why MB isn't number 1 in unit sales."

    Corrected: The only Mercedes that the market doesn't think much of is the ML. They think quite highly of their cars, in fact going by sales numbers, they think of MB's cars higher than Lexus' due to in many cases a whopping price difference not being a factor in MB selling more actual "cars" than Lexus does. This is most clearly demostrated by you. You've tried to state that prestige is the big equalling factor here, which it isn't (see above), but lets go along with that for a minute. If thats the case, then all Mercedes is missing is the SUV factor then right? Since their cars outsell Lexus' quite easily in most cases. I've said just that all along, but you in your statement above you said "MB isn't #1 in unit sales" implying that entire brand's cars weren't worth the price. You, yourself have proven this not to be true, after I already proved it by pointing MB vs Lexus sales, model line vs model line.

    Your initial theory is hugely flawed also because you're not taking into consideration all those models MB has above 70K? Are they not trying to sell those too? Does Lexus even compete past 70K? How could a company that has so many higher priced cars than a competitor, outsell that competitor when that competitor specializes in 30-50K automobiles, when the majority of the more expensive brand's cars are priced over 50K, with some of them over 90K? Look at the price chart given earlier. Again, where do most of MB's models land? How is Mercedes supposed to outsell Lexus when Lexus' biggest sales numbers are produced by their SUV, of which they have three volume SUVs compared to Mercedes' one? Please don't tell me the G-Class is a volume SUV when its projected volume is 1K units yearly, and the "variant" of the G is a 95K AMG model.

    Nobody is contesting or disputing anything about what people are or are not willing to pay for. I never contested this, you brought this up in an attempt to steer away from your initial theory being wrong. Your whole basis was that Mercedes should have no trouble outselling Lexus, and yet you've yet to even address certain points, only to come up with more "what if" questions. Look at the two brands price and model layout on their websites, anyone can see Mercedes in reality has no business even being in a sales race with so many cars priced more than any of their competitors.

    M
  • merc1merc1 Posts: 6,081
    The CL, SL, and S-Class in particular make even their German competition from BMW and Audi look like bargains, on paper. A loaded A8 or 745Li, and I mean loaded each costs about 80K, right where the S500 starts, yet Mercedes isn't at a sales disadvantage compared to a 55-71K Lexus model? Come on now. Mercedes would sell a ton more cars if they were cheaper. Think about Lexus dropping the price of the SC430 to about 40K, the car would sell a whole lot more than it already does. You can want and lust after the most prestigous cars on the planet, but if you don't have the money you can't get it. You are not taking this into consideration. Your theory is based on price not being a factor between a Mercedes and Lexus, and for the majority of buyers that is simply not the case. Price is one of the biggest things Lexus trades on, when comparing themselves to Mercedes, here you're saying that it doesn't make a difference because a Mercedes is more prestigous. So not true for the bulk of consumers. The LS430 can be had with almost everything the S500 has for 71K compared to about 90K+ for a truly "loaded" S500, or as you saw in C&D over 85K for a loaded S430, call it MB being overpriced or whatever, but Mercedes is at a fundamental sales disadvantage here.

    ljflx,

    As long as you are not trying to imply that Mercedes is the only brand that is bought for prestige sometimes, then there is no issue with that statement from me. I agree that everyone should buy they car they want, otherwise for the money I have to spend I'd get a C230 Sedan and call it a day, but I don't want one.

    I know what you're going to say, but I'll ask anyway. I know back in 2001 you looked at the LS430 vs the S430/500 and you bought the LS430. My question is, if the S500 would have been priced closer or nearly the same as the S500 would you have bought the S500 or at least considered it more heavily. I think I know what you're answer will be because of the conversation I'm having with syswei, but I figured its worth a shot. My point is that I know you can afford either, but wasn't the MB knocked for price, in addition to the nav/ride/reliability concerns? Or better yet did the price make the things I remembered you listing as negatives that much harder to overlook????

    M
  • I still say MB's disadvantage in prices should be more than offsetted by their much wider model range they offer. There are some models in the MB line up that doesn't even have competitors available not only from Lexus, but other luxury brands as well.Other than the fact that Lexus has yet to introduce coupe versions of their sedans, if one is looking for a V8 powered 4 passenger luxury sports coupe/convertible, where can you go besides Mercedes(Cl & CLK), at least in the past few years? The BMW 6 series coupe/convertible is coming out though, as well as the M version of the new 4 series BMW which I've heard will be a V8 ,and I suspect there will be more competition coming from other brands as well in the coming years.

    BTW, I think the BMW 6 series is the best looking Bangle design yet. I don't know if it'll appeal to everyone, but at least not nearly as hideous as the Z4.
  • footiefootie Posts: 636
    With 75% of these high end cars being 'leased', isn't the lease price the issue for most shoppers?

    I know quite a few folks that have acquired a BMW, Lex or MB in the last few years. Most of them call their accountant or financial advisor and say "Hey, I am going car shopping for new Merc or whatever, should I lease or buy? Next questions has to do with source of funds..."

    If so, then another big factor here besides prestige and heritage and 0-60 times, is the resale value and the amount of manufacturer's support.

    Cars like MB's and Lex carry pretty good residuals, while BMW tends to be less and Audi/Jag are in the tank. Also, Lex has good money factors from TFS and MB is getting more agressive from MBCC since their inventories have risen here.

    Take an 80K car with a 60% residual - you pay for 32K worth of depreciation 56K average loan with nothing down.

    Take a 70K car with 50% residual - you pay for 35K depreciation and 51K average loan.

    Depending money factors the difference can be very small.

    So I don't get the Encyclopedia class discussions on this issue. It ain't about price. It's about deal and cash flow.
  • You are correct. For those who lease their cars, Mercedes' higher prices may not be a significant disadvantage at all.
  • ljflxljflx Posts: 4,687
    It's still a money factor. In 2001 the S500 would have cost me $375+/- per month more than the LS430. That still works out to be about $13,500 pre-tax and 8,500 post tax differential on a three year lease. If you continue to lease for 6 years or so that's equal to or greater than the price difference in the first place. If you want to spend that money you save on the cost differential you can buy a houseful of electronics or a few nice plasma TV's. I just added a Samsung DLP TV which was about equal to the third year of lease savings I had.

    I always tend to lease because I like a new car and the latest stuff every three years. But as well I find it very difficult to justify a purchase financially - on the cars in this arena. Lower end cars are a different story. I just worked a GX deal at $745 per month with 0 down. I could have bought it but using a 3.5% return on the money I would have laid out over three years upfront (and same on 3 years of lease payments) the price worked out to be $250 cheaper if I lease and buy at lease end (including the lease fee of $500) rather than buy upfront. In 2001 with interest rates a bit higher it was about $1,000 more to lease my LS430 than buy upfront (half of that was the lease fee). So why buy when you can try out the car for three years and decide later and either save some money or spend a tad more. If you decide to buy at lease end and pay a tad more consider it an insurance policy on getting a quality car that pleases you.

    Merc1 - I think our HR handbook is shorter than your last two posts. As for prestige - people buy certain things to impress others rather then themselves. It happens most often with what is seen as the highest price commodity - MB, Rolex etc. But it spreads out very well to the BMW's, Jags, Lexus etc. of the world as well.
  • In Oct 1998 I bought my '99 LS400 with the premium pkg (HID, heated seats, NAV). OTD price was ~$60K. Could I have bought an S-class ? Didn't think I want to shell out that much extra cash for a 3-star prestige. I got a fully loaded luxury sedan for $15k LESS than the comparable (by my standards) MB. OK I couldn't afford the S-class. Does that make you feel better, Merc1 ?

    What irritates me slightly is having someone who does not have an MB (probably cannot afford 99% of them) talk so authoritatively and berate others who, at least, put their money where their mouth is. Someday, Merc1, you will finally own an MB, and we can all rest in peace ! Sorry to make this personal, but these long-winded diatribes gotta end somehow.
  • footiefootie Posts: 636
    With 75% of these high end cars being 'leased', isn't the lease price the issue for most shoppers?

    I know quite a few folks that have acquired a BMW, Lex or MB in the last few years. Most of them call their accountant or financial advisor and say "Hey, I am going car shopping for new Merc or whatever, should I lease or buy? Next questions has to do with source of funds..."

    If so, then another big factor here besides prestige and heritage and 0-60 times, is the resale value and the amount of manufacturer's support.

    Cars like MB's and Lex carry pretty good residuals, while BMW tends to be less and Audi/Jag are in the tank. Also, Lex has good money factors from TFS and MB is getting more agressive from MBCC since their inventories have risen here.

    Take an 80K car with a 60% residual - you pay for 32K worth of depreciation 56K average loan with nothing down.

    Take a 70K car with 50% residual - you pay for 35K depreciation and 51K average loan.

    Depending money factors the difference can be very small.

    So I don't get the Encyclopedia class discussions on this issue. It ain't about price. It's about deal and cash flow.
  • pablo_lpablo_l Posts: 491
    It is about price. That is indisputable. Even people will a lot of money to burn try to spend it smartly. Smart shopping does not stop because people have enough money to buy whatever they please. That is a very flawed assumption.

    The leasing difference is not small. Go to the respective websites and give it a try: leasing comparatively equipped S430 or LS430 turns out to be $1458 vs $989. Quite significant. You also have someone who looked into both talking about about $375 a month. So it *is* a very real money issue, and one's got to decide whether the star is worth the costly premium. Some say yes, some say no.

    Mercedes recipe for success going forward is obviously to keep as many people as possible going for the premium, while the competitors will make that as tough as decision as possible.
  • The biggest difference in the S430 and LS430 is how much more that you get for your money with the LS....It is amazing to me that Mercedes ever sells an S430
  • pablo_lpablo_l Posts: 491
    It's amazing to you, yes. But then there's the people who'd be amazed at those who settle for lesser heritage and/or prestige... and the thing is none of the 2 camps is "wrong". It's about personal preference - different strokes for different folks.

    Buying any car over $30k is, after all, an irrational act to some degree.
  • Just curious...Which camp would you fall into.
  • pablo_lpablo_l Posts: 491
    Depends on the item. With cars, I did go through an escalation exercise until I found out I am not that much into prestige, but rather into what happens to entertain me. I discovered that, somewhat tragically, with my Jag XJR ownership experience. Great car, but bad fit for me for a number of reasons. The fact I opted for a 9-3 convertible for most of my car driving speaks volumes. I do not need for everybody to see what I can and can not afford. But I do have a brand snob in me, and thus I did get a near new car, but I did it i used condition - there's no way on earth I could justify blowing $100k on a car given my current post-bubble income. I do run my budget like a business - I manage it to be profitable at year end. In the meantime, we have added a Mini S to the car stable, and it is a total blast. For all of $25k I am having a great time.

    My wife is different, and a bit like my mother -Freud would be proud- in her car brand preferences. Rationally, she thinks many cars are very neat. But she will go Merc brand every time, even when she shies away from blowing the money on the more expensive offerings (I am happy about that).

    I should also point out that I think the Merc CL is *the* car. I would get it, I could get it, but I prefer to wait until the day where I truly feel I have "arrived" until I celebrate with treating myself to a new CL. Besides, they are damn expensive in maintenance once the warranty runs out, and I do shy away from loading up re-occurring expenses these days...
  • Do yourself a favor and test drive a new ES or an old ES

    If you and your wife doesn't like that car (and the lexus) name....I surrender.

    There is nothing not to like including the price.
  • merc1merc1 Posts: 6,081
    Thats too bad you feel that way, because I could say about the same thing for a person who constantly sites articles as the end of the world, and also doesn't own a MB and who constantly goes by JDP and CR as the end-all authority on everything MB and then tries to pass it off like the rest of the world lives by this stuff. A person that just by their postings on MB cars, you can tell they don't know anything about them other than what they've read. Thats what I could say.

    What me and syswei were doing is debating, and we did so with much more civility than many a debate we have ever had in here about MB and Lexus. If you don't like my posts then don't read them, its about as simple as that. Putting me down by saying (assuming) about what I can or can't afford is you trying to berate me now, of which I didn't do to anyone during this debate. If you don't like what I have to say fine, but you made it personal this time, I didn't. Period.

    M
  • While I agree that to some buyers,they can only buy the car that they can afford. However, when it comes to high end luxury cars, where it's also a status symbol & a means to show off, some buyers will tend to pick the car with the higher price tag regardless of whether he/she think it's worth it. They want their neighbors & relatives to know that they can afford a $80K+ car rather than a $60K car. So at the higher end, higher pricing may actually not be a disadvantage at all to some buyers.In other words, they don't really care what they are getting as long as it's expensive.You can't automatically assume that most car buyers are very knowledgeable about cars & are wise, prudent & rational in their purchase decisions.I've personally known people like that, some among my relatives. There are a good portion of luxury car buyers that are silverspooners that can't fully appreciate the value of money.

    I've also heard that some buyers can justify paying more for a Mercedes or a BMW rather than a comparable Lexus or Infiniti because they can end up losing the same among or even less in depreciation over the period of ownership despite the higher price tag.This is definitely true for some Mercedes & BMW models because of their heritage & name.

    To claim that higher price will hinder sales, while true in some cases, is a way too simplistic way of looking at it, as there are many other factors involved as well.
  • pablo_lpablo_l Posts: 491
    Michael M -

    if the XJR wasn't for me, you can rest assured a more vanilla sedan like the ES is not going to set my world on fire, either. The only candidate is the SC430, as I explained earlier. It is not that I have a bias against Lexus as a brand, by the way - I am fully aware and have always stated their cars are phenomenally engineered.

    gscoupe -

    I agree with everything you say, but the key is to not start lumping the majority of buyers of any brands into certain categories, as some have done. Certainly not every Mercedes buyers is irrational, nor is every Lexus buyer rational. And if with luxury cars it was just a matter of raising the price to maximize appeal, you'd have all these cars being sold at over $200k. But oddly enough, the over $100k market seems to stay constant in units, and it seems more offerings -as have become available recently- do not increase sales at all, a sure indication the super-rich as a rule do never spend what they *can*, but rather that they are governed by fiscal self-discipline. Due to my job, I work with many multi-millionaires (tragically, I am not one myself :) and the vast majority of them is rather spartan in their car buying habits.
  • ljflxljflx Posts: 4,687
    I also know many multi-millionaires and I have the same experience as you. One or two pursue the image but most buy value and what suits them best. Their homes and persona speak prestige, not their cars. I do see that there is a difference with those who inherit money vs. those who earn it though. Those that inherit are more wreckless whereas those who earned it will value it greatly.
  • I agree with you that we shouldn't lump buyers into broad categories, like suggesting that Mercedes aren't selling more cars because buyers who don't buy Mercedes can't afford them. Besides,pricing alone don't dictate everything.I bought an Infiniti G35 coupe which is $10K less than a comparable BMW 330ci, but given that BMW is the brand with the highest resale value in Canada, especially the hot selling & highly reputable 3 series, plus the free service, I never believe I'm saving any significant amount of money, if at all, by going with the Infinti. So price isn't an issue at all in my decision. It's the fact that the Infiniti is the fresher hot looking car with comparable fun & performance to the 3 series,and is not as commonly seen on the road as a Honda that made the decision for me.I think nothing less of the 3 series because it's a great car. I picked the G35 coupe because the Infiniti is more desirable for me at this point in time.
  • mfullmermfullmer Posts: 819
    ...am I seeing a common thread that the Lexus (lets say the LS430) is much more exclusive the the MB?

    Everywhere I go I see S-Class of some nomenclature. Every type of person driving them. I also know 6 people who have '01-'04 S classes (ok, 3 of those have traded them in on more "exclusive" cars - 2 LSs and one Q45).

    I don't see the LS430 everywhere and the person behind the wheel, when I do see one, is someone with whom I can relate.

    So, I guess for exclusivity, the LS430 wins, hands down.

    Of course MB RAISED their prices for '04, with no real updates. What are they thinking? Oh, yes, I know. Those "look-at-what-I'm-driving" types will pay that price for a sub-standard vehicle without question before they will be buy some piece of "[offensive geographical slur ommitted]-crap".
  • pablo_lpablo_l Posts: 491
    It's just you. I don't think any of these cars wins any exclusivity contest "hands down". They all have very valid pros and cpons, and all represent excellent cars. To each their own.
  • this is not a bad car, lots of features, good power and reliability, (looks arguable like many cars), but it just does not sell very well. Anyone have any info on what Nissan plans to do with this car next year? In the future?
  • footiefootie Posts: 636
    If they do anything like what they have done with the rest of their product line, it could be awesome.

    Nissan was on the 'brink' and has come back storming!

    What they gotta do though on their Infiniti cars is get rid of that fish-like, pucker mouth grill design! The M45 has the worst front view on any car I know.
  • pablo_lpablo_l Posts: 491
    THe problem with the Q45 and M45 is that they are very unmemorable design wise. I am sure I have come across them, I just don't know what they look like. Any other car in this class I am able to take mental note of an remember.

    Nissan is going for nice design work as of late, though, so probably they'll fix it in the end. All in all, Nissan is the brand that has gone through the most dramatic transformation. Great turnaround job at all levels.
  • Nissan has made many new entries and redesigns of late, BUT the jury is still out on many of these. In the car category, only the Altima and the Z are doing well. The 2004 Maxima was a bomb ! The Quest is polarizing in design, ditto the Murano. None of whom are breaking any sales records YTD, at least against the competition. No one remembers the Sentra even exists; the redesigned Corolla pretty much squashed that one out.

    In the luxury class, the M, Q, and QX combined do not register a blimp on the car sales chart. Duds, I call them. Here, as with Nissan, only two models are doing well - the G and the FX.

    In the truck/SUV class, their two new entrants - Titan and Armada - are way too new to judge. Only time will tell if Nissan entered the ring too late, or came to the party loaded and ready to take on the challenge of the big boys from Ford, GM and Toyota. We'll see. The Pathfinder has pretty much disappeared. Sad to see a good car go.

    Nissan/Infiniti has a long road ahead, while they have made some good strides, the market has told them they have a ways to go yet. They are a very distant competition in the lux class, barely registering on the richter scale of luxury sedans/trucks.
  • Sorry if I offended you. Don't mean to.
  • merc1merc1 Posts: 6,081
    I don't think I ever claimed that price was the sole reason for lesser sales, or that all buyers fit into certain categories, my point was that price is a factor for some, and such price differences can't generally be ignored or labeled a non-factor.

    M
  • footiefootie Posts: 636
    New Altima continues well, 15th in top 20 of total vehicles sold including pickemups.

    Altima 187K units YTD

    Nissan has sold 2X as many units as VW: 727K vs 361K

    The Z is outselling the Corvette 2 to 1 and has caught the dying Mitsu Eclipse which is down 45% YTD over 02.

    Murano has sold 52K units, 2X the Mercedes ML.

    The new Quest is up 16% YTD at 19.4K units, sells more than 2X Ford's new Freestar.

    Seats is seats. They are doing ok.
  • Price is certainly a factor, but has different effects to different people especially for a luxury brand that serves as a status symbol as well. We are not talking about Toyota and Chrysler here. Sure a Mercedes can be too expensive for some, but to others, their high price is their strong appeal. For some, if it's not more expensive, it just isn't good enough.
     I'm not surprised that affluent people that works with financial experts like ljflx are usually prudent with their finances. But believe me, there are many rich people who don't know or don't care to manage their finances and are excessive reckless spenders. One only has to look at some of those that inherit big fortunes or in which money comes easy like certain celebrities, and how excessive their spending habits are.
  • ljflxljflx Posts: 4,687
    That was my point. A guy that inherits $5-10+mln is far more likely to buy a Maybach or Rolls than a guy who earned $5-10+mln. Ditto for the lower priced luxury cars - primarily from a stature standpoint. Found money (whether inherited or made in a stock bubble or made by celebs where stature is part of the job) will always be spent more wrecklessly than earned money regardless of whether you are talking about cars, jewelry or expensive electronics. All of the multi-millionaires I know earned their money. Do they spend it? Sure. One guy I know very well - who drives an old MB SEL, and a new LS430 - has had his home featured in Architectual Digest. He moved to Lexus from MB because he believes they build cars the way MB used to. I agree with him. His worth is well over $100mln. He'd never spend his money on a Maybach even though his interest income in a year can buy a couple of dozen of them.
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