Affordable Luxury Cars – Are They Worth the Money?
Everyone wants a taste of the good life. And shit, why wouldn’t we? We are practically hardwired to obsess over the finer things and automakers have caught onto that which is why there are a plethora of affordable luxury cars out there. The question is, are entry-level luxury cars worth the money?
It used to be if you wanted to drive like a rich person you had to be a rich person but today it seems like everyone is in a luxury car of some kind. Look around in any traffic jam and you will see armies of Mercedes and BMWs. Even Jaguar’s are gaining popularity again.
So what happened? Where did all these rich people come from? Am I missing something? How can so many people afford these cars?
Well, the truth is that luxury automakers caught on years ago that there is an entirely untapped market of people willing to pay for shit cars as long as they have a luxury logo slapped on the hood. What’s even nuttier is that consumers have proven that they will pay a premium over better optioned domestic vehicles just to acquire that coveted luxury logo.
Affordable, entry-level luxury cars are flooding the market. Recently, I was helping a friend shop for a small sedan and was blown away by the number of base entry-level luxury cars available for cheap.
These cars are literally the equivalent of the rental cars you see at the airport just with a fancy logo on the grill. I cannot figure out why people buy these things.
Affordable Luxury Cars – An Oxymoron
One thing that traditionally defines a luxury item is its price. In the past price was determined by quality, which really makes sense when you think about it. Why do people pay upwards of $50K for a Rolex?
Because it’s hand-crafted by the best watchmakers in the world. It’s more of an art. They last forever and never go out of style.
Another factor in price was exclusivity. This pricing factor can be found in two places:
- Where market supply is controlled – like in the diamond and designer purse industry, and
- where items are no longer being produced – like in the antique industry.
So, an item is seen as luxurious when it sort of ticks all of these boxes, or when it’s price is high because it is exclusive and/or high quality.
But what happens over time is companies catch on and begin to charge high prices for items that aren’t necessarily high-quality and they create their own exclusivity because few people can afford the item.
This is an entirely different type of pricing manipulation. Why would a company do that? Well, they might do it to create an image that allows them to focus on high margins over volume driven profits. I don’t really know.
I mean why does anyone want to buy shit like that in the first place? It kind of goes both ways.
Now, what does any of this rant have to do with cars? Simple. You cannot have a high-quality, exclusive car for cheap and that’s really all there is to it. End of story.
Yet, here we are. Every luxury automaker has flooded the market with entry-level luxury cars. Mercedes with its C300, Lexus with its IS300, Audi with its A3, BMW with its 2 series, and now even Jaguar with its XE.
And people eat them up. They are buying these things like hotcakes. You know, all the people out there buying hotcakes. But should you buy an entry-level luxury car? That’s really the only thing that matters. After all, if all your friends were jumping off a bridge would you?
Generally, I would never recommend any entry-level luxury car simply on the basis that you’re getting the least a luxury brand has to offer at a price that is still a premium when compared to other non-luxury brands.
However, let’s say you really have your heart set on buying a luxury car and the only way you can do it is to buy an entry-level version. Let’s talk about why you should consider avoiding an entry-level luxury car.
When Should You Avoid Buying an Entry-Level Luxury Car?
- If you can’t afford the car if it had extra options
- If you have to finance it beyond 60 months
- If you have no money to put down
- If you do not plan on keeping the car for more than 3 years
- If you cannot afford to pay for the service intervals
- If you cannot afford to pay for “out of warranty” repairs
- If you want the most bang for your buck
The first point on the list is the most important. If the vehicle is such a stretch that you couldn’t afford to add one or two premium features it’s a hard pass.
Most entry-level luxury cars come standard with some decent features, like leather, navigation, and a sunroof but the options list usually stops there. And those options aren’t even that premium by today’s standards. Almost every car has a screen and a navigation system.
Remember, the whole reason something is considered luxurious is that of its quality and/or exclusivity.
The reason they can give you leather as a standard option is that it’s not the highest quality leather and the car isn’t built with the same level of quality materials that it’s more expensive counterparts are made of.
If you cannot afford to upgrade one or two key features of the vehicle than you are largely wasting your money and get much more for your dollar in a non-luxury brand. Another consideration is the financing terms. If the only way you can get into the car is to extend the financing term beyond five years avoid it at all cost.
That goes for any car, but especially luxury vehicles. The reason is that the depreciation curve for luxury cars is usually a little steeper than non-luxury brands. This is due to a number of factors, which you can read about on modeyadviceservice.org. What it boils down to is that the car will be worth far less than what you owe on it in the middle of the loan life (years 2 and 3).
One item that is continuously and perilously overlooked is the maintenance and service intervals required on all luxury brands. This is standard across the board for most luxury models and usually comes every 5,000 and 10,000 miles. Beyond that, even simple maintenance like brake jobs can be upwards of $900-$1,200.
I would bet this is the number one reason why most people trade in luxury cars at a loss and why they depreciate so much more aggressively than non-luxury brands. When you buy one used, you just sort of hope the person before was doing this shit, but probably not.
Finally, let’s discuss the most obvious. If you want the most bang for your buck then entry-level luxury cars are a total waste of money.
Case in point would be the 2018 Mercedes C300 which comes in around $40,000. That’s as much as a college education for a Mercedes that dealerships literally give out as loaner vehicles to 16-year-old rich kids.
I’m serious it’s the lowest end Mercedes. Compare that to the $36,000 2018 Subaru WRX STI which is more powerful, fun, safer, comes with more standard features and is cheaper to maintain and retains its value better. Why anyone would buy a Mercedes C300 is totally beyond me.
I could go on for days why affordable luxury doesn’t exist but in the end, affordability isn’t necessarily a static thing. Some people are capable of paying for more than others. In that case, an entry-level luxury car does make sense. So let’s examine some scenarios when an entry-level luxury model does make sense.
When Should You Consider Buying an Entry-Level Luxury Car?
- If it’s cheaper than other vehicles that have features you don’t care about
- If you value form over function
- If you prefer leasing over owning
- If you can afford to finance the vehicle for 3 years
Entry-level luxury cars were designed to be affordable by the masses, but let’s be honest most people aren’t calling a car cheap when it’s around $40K.
That being said, there’s an entire group of consumers that do consider this cheap. Imagine for a second that Bill Gates has two kids.
There’s like three people right there.
In some cases, these entry-level luxury cars are an affordable item that certain buyers get into and feel good about. Usually, because they are cheaper cars compared to others they have looked into. This class of buyers has the money to pay for a more luxurious item, but don’t necessarily feel fulfilled by things like diamond stitched Napa leather and heated steering wheels.
And that’s okay, in this case, these affordable luxury cars give them the satisfaction of feeling like they are driving a luxury car without having to pay for options they get no benefit from. In the same regard if you can easily afford one of these entry-level luxury cars and you value form over function then I’d say go right ahead.
Even entry-level luxury cars look nicer than their non-luxury counterparts and in some cases, they feel better too. Sure the leather isn’t the finest the brand has to offer, but it’s better than cloth. Maybe these cars aren’t focused on performance but a lot of drivers are only looking for an easy commute from point A to point B anyway.
Finally, and most obviously, leasing an entry-level luxury car can make sense.
In a lot of cases if you have the money to put down on the car then you can snag a pretty low monthly payment on a lease and the car will be under warranty the entire time you own it.
Similarly, if you can afford to finance the car for three years then you will stay in front of the depreciation and likely have a car still under warranty when it’s paid off. In these cases, an entry-level luxury car can make sense.
Entry-Level Does Not Always Mean Affordable
Are entry-level luxury cars worth the money? That’s really up to you as a consumer. But, as you search for your next vehicle remember this: entry-level luxury does not necessarily translate into affordable luxury.
Some items to consider when looking at entry-level luxury cars are:
- Maintenance intervals and costs
- Out of warranty repair costs
- Cost of Insurance
- The cost to repair cosmetic damage
- Resale value
Affordable luxury cars are really designed for people who could afford a luxury vehicle, but maybe don’t want to spend that much on a car.
They exist to capture an audience that could potentially end up in a higher-end vehicle down the road. Almost like a marketing tool.
However, for the average consumer, there are often far better options out there. Check out our post: The 5 Best Hatchbacks of 2018 to find some great alternatives to entry-level luxury cars.