The Wealth Effect: Luxury Car Sales Are Up

You might see a new Trump tweet in the near future taking credit for the dramatic uptick in luxury car sales. Because of what appears to be economic euphoria among the nation’s wealthy, sales of the most expensive of cars are through the roof!

First, let’s define luxury. Are we talking about the latest Tesla? Hardly! More like Ferrari, Bentley, Rolls Royce, Maserati and Porsche – cars that cost more than many middle-class homes.

As you can imagine, these cars don’t roll off the lot as fast as the average Honda. But since the presidential election in November, sales rose an average of 18% through January. Rolls-Royce, with prices starting around $250,000, has seen a 42% jump in sales to nearly 300 vehicles.

Why such a dramatic rise when U.S. auto sales as a whole were flat over the same time period? The stock market, Pedro Mota, president of Rolls-Royce Motor Cars LLC’s North American business, told the Wall Street Journal. “It’s not that our customers didn’t have the money before, but you don’t want to indulge when you’re laying off employees.”

Some wealthy folks still have a more Warren Buffet-like approach to the cars they drive (see Which Cars and Trucks Do Wealthy Americans Drive?). But for car aficionados with very deep pockets the lush times are back. Economists call all this the wealth effect.

Price probably isn’t that big a deal for customers spending a weekend shopping for a new Rolls Royce, but for other cars, generous lease terms and plenty of financing incentives have driven sales higher. If you have to lease, an extra $1,795 per month will get you a 2016 Rolls-Royce Wraith for two years. If you’re looking for something a little more affordable, how about a Maserati Quattroporte S for $788 per month for a three-year lease?

Experts say that when the leases run out and the cars come back to the lot, this luxury new-car buying spree may come to an end because of the glut of used luxury cars looking for homes. Just wait a few years – you might be able to afford that Rolls you’ve always wanted. And maybe some luxe driving shoes from Tod’s.

Read more: The Wealth Effect: Luxury Car Sales Are Up | Investopedia

Photo: Niklas Emmerich Photography The Dorchester. via photopin (license)

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