No holiday season would’ve been complete without those annoying ads in which some smug couple in their designer sweaters surprises each other with a brand-new, bow-tied high-ticket ride. This year, however, a lot fewer dreams came true. Sorry, Virginia, Santa’s 401(k) bottomed out and the Range Rover was out of the question.
Even the fastest and most luxurious cars can’t outrun a vicious recession and credit crunch. Like every maker and seller of luxury baubles — from Bulgari to Saks Fifth Avenue — top-shelf car brands are finding shoppers short on cash and unnerved by flash.
When car sales first showed weakness, luxury-car executives were whistling past the industry graveyard. Many insisted that their oh-so-wealthy buyers were above the fray. If they wanted to splurge on a car, nothing would stop them.
But country club gates couldn’t keep reality out. Luxury car sales have skidded 19 percent this year, according to Autodata, compared with 16 percent for the industry at large. Lexus sales are down 20 percent, more than the drop at Ford. Jaguar is off 28 percent, worse than the slump at Chevrolet. The Germans are crying in their steins as well. Porsche is down 25 percent, BMW 12 percent and Mercedes 9 percent.
Even the ultra-luxury kings are feeling the ax. Bentley’s global sales have tumbled 30 percent, and the company has idled 300 night-shift workers in Crewe, England. Even 007’s Aston Martin is preparing to lay off hundreds of workers.
You might think that Master-of-the-Universe types are still flush. While they still might be worth millions, they’ve also seen their stock portfolios hurt by the downturn in the economy and probably aren’t in the best mood to shop for a $100,000 car. Same goes for the Wall Streeter who was expecting a sweet bonus but got a pink slip instead. And I’ve talked to businesspeople who say they could easily afford a luxury car, but don’t want to look like they’re living large while employees are being laid off or just struggling to make ends meet.
Joe Innaurato has spent 32 years with FC Kerbeck & Sons, a Philadelphia-area dealer whose brands include Rolls-Royce, Lamborghini, Bentley, Maserati and Aston Martin. Kerbeck’s general manager acknowledged that business is down, but said that the established dealership, which has been in the same location since 1962, is holding its own.
"We sold four Bentley convertibles last week, which is pretty good in this climate," Innaurato said, in a 6-figure understatement. The biggest change has been a major uptick in used-car sales. "When the economy gets sticky and lease deals aren’t attractive, even luxury buyers gravitate to pre-owned cars."
David Lucas, Autodata vice president, said the luxury segment is being hammered by the credit crunch, which is making leasing expensive or even unavailable. And experts note how consumer psychology is making even people in perfect financial health leery of making a major purchase.
"Every time you turn on the TV, it’s pounded into your head how bad the economy is," Lucas says.
It must be said that these luxury woes help refute the biggest myth about Detroit: that the Big Three are sinking because they build the wrong cars. If that’s the case, then why are unsold Mercedes piling up on the docks of Los Angeles and Long Beach? The only difference is that import and luxury brands are financially healthy enough to muddle through, and the Big Three are not.
The situation may ultimately benefit luxury brands and models that people perceive as being good values. Acura comes to mind. And although humble Hyundai was criticized in some corners for gambling with the Genesis — its full-size luxury sedan with a $35,000 price that undercuts competitors by $10,000 and more — the Genesis may have the last laugh.
Michael Deitz, product planner for Hyundai sedans, said the Genesis lets buyers feel pampered yet responsible.
"There has been a lot of compulsive spending, people buying things they didn’t really need," Deitz said. "We’re hoping people see us as the smarter, practical purchase."
Or, as Hyundai’s Miles Johnson said, "Who do you want to be in this climate, Saks or Costco?"
Finding a bright spot here is like finding hot pink in Johnny Cash’s wardrobe. But like the cruel correction in housing and banking, this auto market may spark a reality check. We’ve all met the guy who works at the car wash and lives with mom but somehow drives a Cadillac Escalade. We all love our cars. But a lot of people would be better off saving up for a house instead of making a mortgage payment on their car. That is, unless you plan on bunking in that Escalade.
A Michigan native raised and forged in Detroit and a former auto critic at the Detroit Free Press, Lawrence Ulrich now lives in Brooklyn, New York. His reviews and features appear regularly in The New York Times, Robb Report, Popular Science and Travel + Leisure Golf.