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The Value Proposition of Luxury Brands

hpmctorquehpmctorque Posts: 4,205
edited August 15 in Lexus
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?
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Comments

  • euphoniumeuphonium Great Northwest, West of the Cascades.Posts: 3,333
    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." :confuse:
  • fintailfintail Posts: 33,796
    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.
  • berriberri Posts: 4,202
    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.
  • fintailfintail Posts: 33,796
    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.
  • hpmctorquehpmctorque Posts: 4,205
    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.
  • Mr_ShiftrightMr_Shiftright CaliforniaPosts: 45,032
    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.

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  • euphoniumeuphonium Great Northwest, West of the Cascades.Posts: 3,333
    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.
  • Mr_ShiftrightMr_Shiftright CaliforniaPosts: 45,032
    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.

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  • lemkolemko Posts: 15,187
    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!
  • andre1969andre1969 Posts: 22,002
    True but the LaSalle failed as a brand---that should tell us something about having too narrow a dividing line in "tiers" of luxury.

    Well, the LaSalle Avalon does give Toyota a nice, large-ish car to sell, where otherwise they might have had to dilute a Lexus model. Isn't that pretty much what the LaSalle was there for? To give Cadillac dealers a cheaper, bigger-volume car to sell, without diluting the Cadillac name?
  • Mr_ShiftrightMr_Shiftright CaliforniaPosts: 45,032
    Yeah but nobody knew what to make of the car, especially with all the other GM brands hovering around it a bit too closely. Picture an Avalon, and $200 below it a Bakelon, and $200 below that a Overlon....you get the idea.

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  • andre1969andre1969 Posts: 22,002
    Oh yeah, I think the LaSalle had definitely run its course. IIRC, in later years, its price crept up closer to the real Cadillacs, until it was finally replaced by the "proper" Cadillac Series 61?

    In later years, I guess the Series 62 and later Calais sort of filled the LaSalle's role, although eventually Cadillac figured they didn't need it at all, and dropped it. Eventually, most of the manufacturers just figured that they could cover the same market with one model and 3-4 trim levels, rather than 3-4 different models. For example, at one time Chevy had Biscayne/Bel Air/Impala/Caprice, but by 1986 or so it had been consolidated to Caprice, Caprice Classic, Caprice Classic Brougham, and Caprice Classic Brougham LS.
  • hpmctorquehpmctorque Posts: 4,205
    edited October 2010
    Since I haven't driven an Avalon in years, and have never driven nor even ridden in the large Lexus sedan, you happened to cite two models where I agree that paying more isn't worth it. This is true even though the Avalon is a FWD V6 and the big Lexus sedan is a RWD V8. Because the large Lexus, like the Avalon, emphasizes comfort over sport to an extreme. I doubt whether the RWD architecture of the big Lexus really matters much in the driving experience. So, you're right; someone looking for a large, comfortable sedan can't do better than the Avalon from a value standpoint. Although some might choose the Buick LaCrosse over the Avalon, that doesn't disprove your point.

    Now, if you compare a loaded Camry V6 versus a Lexus ES350, one could argue that the ES350 is a better value proposition. Although they share the same platform and drivetrain, I think the ES350 is worth the extra money, since for not too much more it looks more upscale than the Camry, has a significantly better warranty, and it ages better. However, I completely agree that the differences have narrowed enormously from your Chevrolet versus Cadillac comparison. Back in the day, GM made sure that the look and feel, and the driving experience, were completely different.

    I realize that I'm talking out of both sides of my mouth, but I conclude that whether luxury models are a better value than plainer, more affordable ones today depends on which models you compare.
  • Mr_ShiftrightMr_Shiftright CaliforniaPosts: 45,032
    Hmmm....$10K more for an ES 350 over a loaded Camry? I dunno....yeah, maybe, but I think in this case you're paying mostly for the prestige of the Lexus name. I mean, a Camry, in terms of public perception (real or imagined) is sort of "rental car" level, even with the premium pak and the V-6. And you're right, Lexus styling is better. I do see your point.

    However, if you loaded up the ES 350 and pushed it over $40K, this unflattering comparison might fall apart. A $15 to $17K diff between a loaded Camry and an ES 350---well, $17K is a big chunk of change!

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  • hpmctorquehpmctorque Posts: 4,205
    We're now on the same page, Shifty. There isn't much latitude in this comparison, and option packages can easily be the factor that tips the scale one way or the other.
  • hpmctorquehpmctorque Posts: 4,205
    So, what do other readers think is the wiser choice, near-luxury or high end mass market?
  • lemkolemko Posts: 15,187
    The 1963 Buick Riviera was meant to be something of a LaSalle revival. Notice the twin grilles on each side of the central eggcrate grille mimick the tall LaSalle grille of fine horizontal bars. Early mockups of the Riviera actually carry a LaSalle II designation.

    Back in the early 1930s, Buick and Oldsmobile had lesser-priced companion makes called Marquette and Viking. Pontiac was a lesser-priced companion make to Oakland that eventually superseded it.
  • berriberri Posts: 4,202
    I think the lines between mid priced models began getting all hosed up in the 60's. Cars like Chrysler Newport or Buick LeSabre began chasing Chevy buyers while the Caprice or Ford LTD started going after lower level mid priced buyers. I always liked a mid level car line, but today the low and mid level is covered by one car line like Camry LE vs. Camry XLE. I don't think it will go back.
  • hpmctorquehpmctorque Posts: 4,205
    edited October 2010
    In terms of Toyota models, wouldn't you say that the mid level is also covered by models such as the Avalon and Lexus ES350? One could argue that the latter two are the spiritual successors to the Chevrolet Caprice, Ford LTD, and Plymouth Fury III, and that the ES350 is the modern equivalent of the Olds 88, Buick LeSabre, Mercury Montclair, Dodge Monaco and Chrysler Newport.
  • Mr_ShiftrightMr_Shiftright CaliforniaPosts: 45,032
    I'll go you one further. I personally find it hard to categorize *any* car under the $50K mark as a "luxury brand". There really is a difference between a $40K and a $90K automobile.

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  • berriberri Posts: 4,202
    I wouldn't really argue with you. However, given that an Avalon is a Camry with a bit more interior space and a few accouterments you might say it was actually the Newport or 88. Since ES350 are usually equipped with a bigger price spread to Camry than basic list prices, you may also argue it is more like New Yorker or 98 perhaps (kind of rides like one).
  • berriberri Posts: 4,202
    Luxury has always been a bit vague to me. Cadillac seemed to have a fair amount of distinction between a DeVille and the much upscale equipped Fleetwood. Then they had an Electra fighter Calais for awhile. I guess you could say the mid level Lexus are near luxury while the upper line is luxury. The ES350 has never really been clear to me. Its much plusher than Camry with just a bit more power, but it may be more just a statusmobile than a near luxury car? At BMW the 300 series always struck me as sport oriented rather than near luxury (nice car though).
  • Mr_ShiftrightMr_Shiftright CaliforniaPosts: 45,032
    I guess I'm arguing in the abstract here, or more about "marketing".

    I mean, if the Hyundai Genesis is now a "luxury" car, what does that make a BMW 7 Series, a Mercedes S class?

    If anything can be "luxury" then really nothing is luxury. The word becomes meaningless.

    Of course one can argue if that you think there's a rhinoceros in your bathroom, then there really IS a rhinoceros in your bathroom---so if you think you have a luxury car, and you're enjoying that, who's to rain on your parade?

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  • andre1969andre1969 Posts: 22,002
    I mean, if the Hyundai Genesis is now a "luxury" car, what does that make a BMW 7 Series, a Mercedes S class?

    Well, it's kind of like the definition of "rich" that's being bandied about in politics. If you're in the top 2% or whatever of wage earners, you're "rich", regardless of whether you make $250K per year or you're Bill Gates. Nevermind the fact that the guy making $250K per year probably has more in common with the cashier at McDonalds than he does with Bill Gates!
  • berriberri Posts: 4,202
    Now we've got a $58K Hyundai out. Didn't VW already try this? Not sure that's going to be much of a mover. For resale I think that kind of money means you'd better get that MB, BMW, Lexus, etc. badge or you may learn quickly about depreciation.
  • fintailfintail Posts: 33,796
    I think luxury is very subjective, along with value. We all get luxury and value from different things.

    To the driver of a 1996 Corolla, a new leather lined nav-equipped Corolla will seem luxurious. To the driver of a Phantom, a new Equus won't.

    I still can't see the Equus making an impact. Starting at 58K is very ambitious for something with dodgy styling and likely less than world class road manners, all from a name that doesn't have much cachet. Not that it won't sell at all...but with leftover 2010 Genesis being offered on TV here, I think this might be going overboard for Korean luxury. It will be a hell of a used buy in 3-5 years though.
  • Mr_ShiftrightMr_Shiftright CaliforniaPosts: 45,032
    edited October 2010
    Since the operative word of this topic seems to be "VALUE" I guess what's really important is that the car being touted as a "luxury" automobile had better convey a sense of "money well spent" to the purchaser.

    For a performance car, say like a Corvette, a somewhat drab and unimpressive interior is forgivable because you get more than your bang for your buck in performance. For a Chevy Volt---ditto in another way---you get great MPG, the whole cachet of an electric/gas whizzo-gadget, etc---even with the still somewhat downscale GM interior on a $40K++ car.

    But for a touted "luxury" car, it had better feel, smell, perform and be as quiet and as trouble-free as the word LUXURY implies, --- otherwise, the buyer will not perceive the "value".

    I guess what I'm saying is that the term LUXURY has more to prove than the term "innovate" or "high performance. With "innovative" it just has to be different in some way, even if it doesn't work all that well (CVTs for example? or backup cameras?)....with "performance" it has to make noise and go fast, sorta kinda....but with "luxury" it has all these other roles to fulfill.

    You might not mind if the Corvette's gearshift knob comes off in your hand (oh, just go buy another one) but if your headliner falls off your luxury car into your face while you're driving---you are not one bit happy.

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  • j2jj2j Posts: 147
    "I guess I'm arguing in the abstract here, or more about "marketing".

    I mean, if the Hyundai Genesis is now a "luxury" car, what does that make a BMW 7 Series, a Mercedes S class?

    If anything can be "luxury" then really nothing is luxury. The word becomes meaningless."

    *******

    Well, the Genesis fares better in comparison to the 5 Series, E Class, Lexus GS, Infiniti M, etc.

    What's more "luxury" - the Genesis sedan or the C Class? What about the B Class and the A Class?

    And does it matter that the E Class (w/ weak-engines and pleather seats) serves as one of the most popular taxi fleet models in Europe?

    Also, the royal family of Japan gets chauffeured around in a Toyota (Century) and not a Lexus (putting aside that all Lexus models were branded as Toyotas in Japan until 5-6 yrs ago).
  • fintailfintail Posts: 33,796
    I don't know if trouble free is expected, at least not absolutely, or in the global market. The Germans always have quirks or even severe defects, but people still flock to them - the driving experience always seems to make up for it. I will never claim any MB I have owned was trouble free, but I can deal with an occasional hiccup for the good times. And I won't even get started on British cars.

    But otherwise, I agree ....IMO real luxury is a combination of the mastery of certain vehicle traits. Those traits may vary in the eyes of the beholder.
  • j2jj2j Posts: 147
    "Now we've got a $58K Hyundai out. Didn't VW already try this? Not sure that's going to be much of a mover. For resale I think that kind of money means you'd better get that MB, BMW, Lexus, etc. badge or you may learn quickly about depreciation."

    ****
    The Phaeton started (in today's dollars) at over $70K - no value proposition there (why get a Phaeton when the A8, no big seller in its own right, was only a few thousand more?

    And the LS400 became a big seller due to its value proposition - starting at an original MSRP of $35K.

    As for depreciation, the Equus will likely do better than you think; the Genesis sedan has better residuals than the Infiniti M.
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