Shopping for a luxury car during the downturn? The timing is certainly right since there are plenty of great deals to be found. But for those who want a premium ride at the lowest possible price, it takes a bit of creativity--not to mention flexibility.
Whether it's shopping around for rebates, buying models with smaller engines or sacrificing high-tech amenities, there's usually a way to drive off the lot with a luxury car for less.
"Do your research before coming under the spell of the car salesperson," says James Bell, editor and publisher of IntelliChoice, a provider of consumer automotive information. "You can buy a luxury car with all of the brand snobbery but without spending extra money for things you don't need."
An example of this is the five-seater Land Rover LR2, which costs $33,985 and comes with a 3.2-liter V6 engine. It has similar amenities to the $48,525 LR3, but most buyers, particularly those without children, don't need the third-row seat in the larger model. And many don't need the extra, gas-guzzling power of the V8 engine that's under the hood of the LR3. Opting for the smaller version saves nearly $15,000.
A Buyer's Market
Saving money, of course, is what most car buyers want to do in the first place, regardless of the state of the economy. But because all car makers are faced with lackluster sales, which were down 12.8% during the first nine months of the year compared with the same period a year earlier, dealers need to move their cars off the lots.
Cash incentives to customers averaged $4,313 per Cadillac sold from Sept. 1 to 28, 2008, much higher than the $3,694 average incentive in the luxury car segment during September 2007, according to Power Information Network, a researcher of automotive data. And 68% of the Cadillacs sold in September 2008 were purchased with an incentive, which is more than quadruple the 14.6% average in the luxury car segment.
Therefore, the only thing standing between consumers and good deals on luxury cars is common sense. The trick for consumers is keeping their needs in mind and their desires in check.
Case in point, a 2009 model Cadillac with a smaller engine, like the $44,515 STS that's equipped with a 3.6-liter V8, costs $10,000 less than the STS with the 4.6-liter V8. And there's even the possibility of additional discounts with a $2,000 dealer incentive on the 2009 STS--that's a potential savings of $12,000. Dealers sometimes offer incentives that the manufacturer paid to motivate the sales staff, but dealers often pass the savings along to customers.
Unfortunately, cash rebates are rare in the luxury market because makers of those vehicles don't want to diminish their brand by tacking on rebates, Bell says. Most use low financing rates and lease deals to make a purchase more attractive. About 38.5% of luxury cars sold in September were lease deals, while 56.3% were sold with low financing rates.
That's the case with Mercedes-Benz and BMW. There were no cash incentives offered on either automaker's models in September, but 55.1% of Mercedes sold with a finance rate of 5% or less, as did 81.3% of BMWs sold during the month.
Cut Down On Gadgets
Buyers who want to drive off a dealer's lot with the lowest price can achieve this also by minimizing optional equipment, says Bell.
The entry-level BMW 328i is a compact sedan with a base price of $33,400. The car comes loaded with amenities like quality vinyl seats, 10-speaker sound system and power windows and doors. Overall, that's not a bad deal.
But a BMW buyer who can't keep his or her appetite for the high-tech in check might want to spring an additional $3,350 on the premium power package, which includes Dakota leather upholstery, power adjustable seats with memory, $2,100 for the iDrive-based navigation system, $875 for an upgraded 13-speaker sound system and $1,150 for a cold-weather package that includes a heated steering wheel, retractable headlight washers and three-stage heated front seats. All these options add an additional $7,500 to the cost to the car.
Sometimes it's simply a matter of taking size into account. Like the aforementioned Land Rovers, smaller cars can have significant price differences on very similar models. The $32,625 Saab 9-3, for example, is equipped with 2.0-liter four-cylinder turbo engine, leather upholstery and seven-speaker sound system. It has a similar interior as the Saab 9-5, which has a 2.3-liter four-cylinder engine and two additional speakers (a total of nine). Not much of a difference--but the 9-3 model costs $6,000 less.
Just as in normal economic conditions, saving on a luxury car is more about doing some homework and thinking about your specific needs.
"You don't have as much leverage with some of the all-new models like the Audi A4, Jaguar XF, Lincoln MKS and BMW 1 Series," says Tom Libby, senior director at J.D. Power and Associates and the Power Information Network. "And credit is a problem for a lot people. But in a down market there are a lot of opportunities for buyers who want a luxury car."