DETROIT — This holiday season, the luxury car buyer is offering a simple phrase: I'm not spending too much.
Wealthier shoppers are trickling back into showrooms after staying away much of the year. But there's a catch. Many are pinching pennies, sort of, by choosing smaller BMW and Mercedes models, or they're buying top-of-the-line cars from cheaper brands.
This year, almost 14 percent of luxury buyers replaced old vehicles with brands other than traditional high-end names such as Audi, BMW, Cadillac, Infiniti, Jaguar, Lexus, Lincoln, Mercedes and Porsche. That's up from just 4 percent in 2006 and a reminder that these buyers still don't feel as wealthy as they once did. Home values are still down and portfolios shrunken, despite the stock market's gains this year.
Two potential beneficiaries of the shift are Buick and Hyundai, brands offering luxury models that are much cheaper than Beamers and Audis.
Buick for years was known for cushy, boring sedans normally found outside grandma's house. The average Buick buyer is still about 70 years old, and the brand is desperately trying to attract younger drivers and reverse a sales slide, says Aaron Bragman, an auto industry analyst with Global Insight in Troy, Mich.
This may be its opportunity.
After years of ho-hum styling, blase interiors and soft suspensions that made driving a chore, Buick's new LaCrosse luxury sedan is far sportier than its predecessor. It's got crisper handling and sleeker styling designed to appeal to people in their 40s and 50s. It also includes on-board hard drives and other electronic gizmos for younger drivers, all while costing $5,000 to $20,000 less than European and Japanese luxury competitors.
At $27,000, Buick's German-designed LaCrosse performs as well as its more expensive competitors, yet has everything luxury buyers are seeking, Bragman says.
That's important because luxury shoppers are picky, even when they economize. While many are now willing to give up a prestigious name or a bigger car, they still want cutting-edge styling along with reliability and safely. They demand tight handling and a quiet ride. The car must have excellent fit-and-finish inside and out and features such as heated leather seats and navigation systems.
"They may very well be downsizing in terms of the package. They're not downsizing in terms of the features they want," says Art Spinella, president of CNW Marketing Research of Bandon, Ore.
Luxury for less
That's just what Craig Bierley, Buick's product marketing director, is thinking. And he says the brand is capitalizing on the trend.
"People are reconsidering the choices on the things they spend money on."
LaCrosse sales took off after a new version arrived in showrooms last summer. Sales rose 63 percent last month.
The new LaCrosse, Bierley says, has quadrupled the number of buyers it attracts from other luxury brands. In December, Buick dealers are reporting even more trade-ins of Lexus and Infiniti models, he says.
Another winner is Hyundai's Genesis, which has received stellar reviews for its luxury and handling but can cost $15,000 to $25,000 less than higher-end cars.
Joan Sher, a Fort Lauderdale, Fla., real estate agent, switched over last month when she gave up her Mercedes GL450 sport utility vehicle for a loaded-out Genesis.
Replacing the Mercedes would have cost more than $60,000, so Sher opted for value and spent $44,000 on the Hyundai.
"It's more affordable but at the same time a very comfortable car," she says.
Even with a small resurgence for the holidays, luxury car sales are down 27 percent so far this year. But November sales fell just 8 percent, and dealers are reporting increased traffic this month.
Those trends reflect revived confidence among consumers. In the third quarter, net worth — the value of assets such as homes, bank accounts and investments, minus debts like mortgages and credit cards — rose 5 percent, to $53.4 trillion, the Federal Reserve says. It was the second straight quarterly increase. Personal incomes rose in November at the fastest pace in six months.
Yet even with those gains, Americans' net worth remains far below the peak of $64.5 trillion reached before the recession.
Trend toward smaller cars
Buying a cheaper car brand is one way to save money. Another is trimming size.
Rick Case, who owns a chain of dealerships including Acura and Audi in Georgia, Ohio and Florida, says many shoppers want smaller, less-flashy cars.
At his Acura dealerships, the $30,000 TSX compact sedan became his top-seller this year, displacing the TL midsize at $35,000. The trend is not just at his dealerships: Nationally, sales of the compact soared 24 percent in November, while the midsize plunged 35 percent.
The number of luxury buyers replacing their cars with smaller vehicles has tripled to 16.7 percent in the past three years, according to data gathered by CNW. Larger Lexus, Mercedes and BMW models generally have taken big hits, and many analysts predict the downsizing will continue as people try to keep costs down in an uncertain economy.
CNW's Spinella disagrees with that assessment.
CNW has tracked auto sales for 28 years. It says people downsized during every economic slump but returned to their old ways upon sustained recovery.
But George Pipas, Ford Motor Co.'s top sales analyst, says that this recession changed free-spending habits of the past two decades, making people more cautious.
That frugality, combined with the government's push for more fuel-efficient vehicles and concern over global warming, will likely sustain the trend of going smaller, he says.
"Consumers are going to be more likely to spend within limits, to reconcile their spending with their income," Pipas says.
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