Entry-level luxury cars buck overall downtrend

By Earle Eldridge
USA Today

Buyers are flocking to luxury car brands for entry-level models and sport utility vehicles while the rest of the auto market stumbles.

Ten of 12 luxury brands this year have outperformed the overall auto market, which is down 2.7 percent since January. Up: Lexus, Mercedes, BMW, Infiniti, Acura, Cadillac, Audi, Saab, Jaguar, Land Rover. Down: Lincoln and Volvo.

Particularly strong have been sales for entry-level models. Analysts say it's because of stable growth in income for middle-class households, innovation and incentive deals.

Many entry-level buyers are moving up from Toyotas, Hondas and domestic brands such as Ford, Chevrolet and Dodge, says Art Spinella of CNW Marketing Research.

"These people are drawn to Jaguar, Mercedes and Lexus because they are aspirational brands," he says. "They always wanted a luxury car, and now they can afford one even though it's not the most expensive model."

That describes Marith Hicks of Las Vegas, who leased a 2002 Lexus ES 300 on June 3. "This is the nicest car I've ever had. The price was right, and I always wanted something that was a little better in quality," Hicks said. According to Hicks, the lease costs her just $18 a month more than the payments for the 1999 Oldsmobile Silhouette minivan she drove previously.

James "Spike" Bragg of Fighting Chance Car Buying Service says he's getting more requests from consumers interested in cross-shopping entry-level models, which generally range from $27,000 to $35,000.

That helps offset what industry analyst Susan Jacobs says is a tendency for sales of top-of-the-line models, those costing more than $50,000, to decline as the stock market falls.

To automakers, the boom in entry-level sales justifies efforts to make their premium brands more affordable.

Mercedes-Benz was widely criticized in the 1980s when it introduced the 190, known as the "Baby Benz" and predecessor to today's C-Class. Analysts said a cheaper Benz diminished the esteem value of the Mercedes brand.

Jaguar faced similar criticism when it introduced the X-Type compact sedan last year, priced under $30,000.

The C-Class and X-Type are the best-selling models in their manufacturers' lineups so far this year.

Doug Speck, vice president of retail operations for Aston Martin, Jaguar and Land Rover, all luxury brands owned by Ford Motor, says officials debated offering a $30,000 Jaguar but decided it was necessary to expand the brand.

Sales of luxury SUVs, particularly the newer Cadillac Escalade and Acura MDX, also have been strong.