While the sticker price of a new luxury car is always going to be higher than the sticker price of an economy car, you may be able to negotiate a better deal on the luxury car. Reason? For one, there's less profit margin built into the price of an economy car - or even a mid-priced car, for that matter. If the MSRP sticker price is, say, $15,000 - the dealer's cost (what he paid the manufacturer for the vehicle) is probably not much lower than that figure. If he sells cars for less than he paid to acquire them, he probably won't be in business very long.
Even with factory-to-dealer rebates - which compensate the dealer for a "below invoice" sales price - there's usually not more than a couple thousand dollars' worth of "wiggle room" on the bottom line price of the typical economy car.
But with luxury cars, it's a different story. The MSRP sticker price you see is usually pretty well-padded - often by as much as 15-20 percent or more. This is especially true of luxury SUVs - which are typically higher-trim versions of non-luxury counterparts (and thus, less expensive to build than a luxury car that does not share a chassis and other major parts with an already-existing "cousin").
For example, the Lincoln Navigator SUV is basically a higher-trim/better-equipped version of the Ford Expedition SUV. There may be as much as $10,000 profit margin built into the sticker price of such a vehicle - and thus, a great deal more "wiggle room" to negotiate a lower price.
Other factors that make it possible to get a better deal on certain luxury-brand vehicles include:
Current market position
Some brands have to be more aggressive with incentives such as cash back offers, rebates, special low-rate financing, etc. in order to lure customers away from competitors.
General Motors' Cadillac division is an excellent "case in point." After several years of declining sales and decreasing market share, it has completely revamped its entire model lineup to more effectively compete with brands like BMW, Lexus and Audi, etc. But in order to get BMW, Lexus and Audi buyers to take a look at its latest offerings, Cadillac has had to put some very tempting offers on the table - including (at the time of this writing) as much as $5,000 cash back on the XLR retractable hardtop roadster and $4,000 cash back on the full-size DTS sedan. Special low-rate financing deals are also available. (For more information about GM's latest offers, go here).
Lincoln is another brand that is currently struggling to rebuild its market position - and is thus offering some great deals on various models, including (at the time of this writing) as much as $6,500 discounts on the full-size Town Car sedan, special lease deals on the entry-luxury MKZ sedan ($339 per month for 39 months) and up to $3,000 cash back on the Navigator luxury SUV. For more information about Lincoln's latest offers, go here).
Chrysler's troubles can work to consumers' benefit, too. The struggling automaker is offering $3,500 cash back on the 300-series luxury sedan, including versions equipped with the Hemi V-8 engine. (Info on current offers may be found here).
The flip side of this is that brands that are doing well - Lexus, for example - are less likely to be interested in haggling over price. They don't need to, so they don't.
Trendiness/popularity/newness
Part of what drives the price of a luxury car (up or down) is its perceived exclusivity; thus, models that have just come onto the market (or which have just been substantially updated) will typically have less-negotiable prices. The dealer tells you what you'll pay - take it or leave it. If you don't buy, the person behind you probably will. Thus, the sticker price of the just-launched hybrid version of the Lexus LS sedan is not one you'll be likely to haggle much over.
On the other hand, when a given model has been out for awhile - or there's a newer/updated version on deck - the "exclusivity factor" wanes and the price suddenly becomes more negotiable. For example, Infiniti's G35 luxury-sport sedan/coupe has been significantly updated for the 2008 model year - and '08 models are becoming available at dealerships. However, it's still only halfway through the '07 model year - and there are plenty of 2007 G35s still awaiting buyers. You can be sure that the deal on an '07 G35 will be more favorable than the terms you'd be able to wrangle on an '08.
Here's where it pays to keep abreast of new model changeovers by reading industry trade publications, such as Automotive News (www.carmild.com), as well as car enthusiast's magazines such as Road & Track, Car & Driver and so on.
Footnote: Some of the best deals you'll find are on luxury cars (and brands) trying to establish themselves as "luxurious." Perhaps the best case-in-point here is VW's Phaeton ultra-luxury sedan. This model - equipped with a 12-cylinder engine and every bit the equal, in terms of amenities, features, power and refinement, etc. of equivalent BMWs, Audis and Mercedes-Benzes - was heavily discounted relative to those cars simply because VW isn't perceived as a "premium" brand.
The same is true of brand such as Hyundai - which will soon offer a V-8 powered high-end luxury sedan (in 2008) designed to compete with top-tier Japanese models from Lexus , Acura and so on. But Hyundai will be forced to offer much better deals in order to get buyers to take a look - even though its new luxury sedan (if prior experience is prologue) is sure to be a very credible alternative to the mainline, already-established Japanese luxury car brands.
Slightly used
Depreciation affects almost every new car, but luxury cars tend to suffer the most because their initial value is more inflated. It is not uncommon for a luxury car to lose 20-30 percent of its "sticker price value" during its first year on the road. Thus, great deals are available on slightly used luxury cars - which will still look and drive just like brand-new examples and in most cases still have the majority of their factory warranties in effect.
A side benefit here is that any "bugs" (for example, minor electrical glitches with complex systems such as DVD players, GPS units, electrical accessories/gadgets, etc.) will likely have already cropped up and been dealt with before you acquire the vehicle. Modern luxury cars are enormously complex and it is not uncommon for brand-new models to be plagued by minor (but still annoying) "little things" during the first few months of ownership. Buying a car after someone else has dealt with these gremlins can save you hassle as well as money.
Generally, domestic-brand luxury cars depreciate faster (and more precipitously) than import brand-luxury cars - so that's where you'll find some of the best values. But this is not always true. And within a given brand, some models will hold their value much better than others. A good way to research depreciation trends is to check current lease rates on the cars you're interested in. The monthly payment on a lease is in part based on the so-called "residual value" - i.e., what the car is expected to be worth at the end of the lease period. Cars (and brands) with lower residual values are expected to lose their value more quickly, etc.
Or simply shop around; you'll very quickly discover which makes/models of luxury car are better (or worse) values a year or two after they leave the showroom.
