Earlier this month, a Ford executive told analysts during a conference call that while Lincoln sales were slightly down, they expected an uptick in the coming months.
The luxury models, he said, were carrying the brand. And as summer rolls out, he expected them to continue increasing and engulf the market.
Signs of consumer interest in low-priced luxury vehicles have been beneficial to high-end carmakers. Companies like Mercedes-Benz and BMW have expanded their portfolios to include entry-level cars as a result of low rates, analysts said.
The models are targeted to rising buyers as a gateway vehicle for higher-end cars down the road. Shoppers say they’re often drawn to entry-level luxury models by the classy styles along with a quiet ride, heated seats and a sunroof. But most of all: comparatively low prices.
As consumer spending has grown, albeit slowly, during the economic recovery, interest rates have stayed low – allowing spenders to splurge if they’re safe in their job and have the extra cash.
And both buyers and carmakers have capitalized on perpetually low interest rates, analysts said, and have a tendency to lease because of demographic shifts. It’s an across-the-board movement that’s affected all cars, but especially luxuries, according to Bloomberg analyst Kevin Tynan. This trend wouldn’t be happening, he said, if rates were significantly higher.
Asking prices for these cars show the shift. The BMW 3-Series has led its class of luxury cars in the last year and a new 2014 model only costs about $32,000. Mercedes’ C-Class, the second best-selling in the last year, only costs about $36,000. Both are at least $60,000 cheaper than their respective maker’s flagship model.
“The way they appeal to upwardly mobile buyers are more affordable products,” Tynan said. “It’s not just that they’re lowering prices – they’re creating products.”
Brands like the Lincoln MKZ have become a global trend for buyers with a little extra cash to spend. Camille Bratek, 52, opted for one after driving Dodges and Chryslers for years, although she vowed not to go with Fords after a bad experience years before. When she looked for a new car three years ago, she found the MKZ offered a better ride, better amenities and a nicer look for the price offered.
“You get a lot of more bang for your buck, I think,” she said. “What I wanted in a car really came basic in the Lincoln. It really gave more for my money.”
When Bratek, who lives in Buffalo, New York, goes to look for a new car, she said her next goal is a Lincoln MKS, which is a step-up from the current model she drives. So long as the company’s style stays appealing and has reliable service, she’ll stay with Lincoln.
While sales were down in April and it doesn’t lead the market, most of the buzz has centered on the MKZ. Selling for an average price of $35,190, the car has become more popular as Ford touts it as a key essential to its sales. The amount sold, compared to the same time last year, is up 21 percent, according to Ford.
John Felice, Ford’s vice president, said earlier this month the company expects MKZ sales to continue climbing when the company releases a small utility version of the vehicle later this year. “The premium luxury small utility segment is one of the fastest-growing in the industry,” he said. “So we couldn’t be more excited about the timing of delivery of the new MKZ small utility, or Lincoln here this year.”
And the rush for luxury cars can be most seen in leases, which some say is a step toward moving up in luxury brands. After spending most adulthood driving mid-level cars, Frank Gulluscio of Howard Beach, Queens, decided to upgrade to a new MKZ in 2012. When the car was washed out by Sandy after only two months, his dealership let him lease a 2013 model, which he said doesn’t compare to anything else he’s driven.
So when Gulluscio, 67, said he has to look for a new car at the end of the year, he’ll likely lease another Lincoln or a Cadillac. “I would go for an entry level luxury, sure,” he said. “The bottom line is it’s a luxury car. I’m spoiling myself at this point in time.”
John McElroy, a Detroit-based analyst, said he’s seen companies like Mercedes and BMW aggressively push for leasing lately, making the cost of luxuries easier on buyers like Gulluscio. An increased campaign for leasing and lower prices for the vehicles will keep pushing more buyers to move up in models.
Tynan said the number of cars leased has increased over the last decade. It now makes up for almost 30 percent of vehicles purchased each month in the United States for all car classes. In 2007, that number was just 10 percent and Tynan said it could be a generation more hesitant toward commitment.
“It’s not unlike your phone contract,” he said. “The younger generation doesn’t think about ownership the way older generations did. By leasing, you’re not assuming as much risk. You hand the keys back and walk away.”