How low can they go? Entry-level luxe cars heat up – CNBC.com

Posted: Monday, January 20, 2014

Nonetheless, Sullivan said, it’s a little odd and unexpected to see the Germans get so competitive in this crowded market. In some ways they’re reversing roles with the Japanese, whose luxury brands originally debuted in the 1980s as bargain alternatives. The lowest-priced Lexus, the IS250, now goes for $35,950.

Only Honda‘s entry-level Acura ILX, at a suggested retail price of $26,900, comes in at a lower price than the new German offerings, but it boasts far fewer features. What’s more, the brand doesn’t carry nearly the cachet of its German rivals, analysts stress.

Starting prices often meaningless

The reality, however, is that these entry prices are largely meaningless, cautioned Stephanie Brinley, a veteran analyst with IHS Automotive.

“You’ll have a hard time finding a car at that price,” she said.

While models like the Mercedes CLA and Audi A3 are reasonably equipped to start with—the A3 includes leather seats, a retractable touch screen, 4G connectivity, a sunroof, xenon headlights and a Bang & Olufsen audio system as standard gear—most customers are loading up with options. Audi will offer a more compelling engine package, allowing buyers to upgrade from a modest 1.8-liter inline-four engine to a 2.0-liter turbo-four option for an extra $3,000.

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Mercedes, meanwhile, has a high-performance alternative, the CLA45 AMG, which starts at $47,450.

Even if a buyer were to want a stripped-down version, good luck finding it, analysts warned. With less than a 10-day supply in showrooms—compared to an industry norm closer to 60 days—Mercedes has little incentive to build many of those base models, and few dealers are ordering them.

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According to data collected by Kelley Blue Book, the average transaction price for a new Mercedes CLA is coming in closer to $36,000.

But that’s not unique to luxury automakers. Even a Ford Focus can push into the $30,000 range when loaded up with options. And for many buyers, it’s worth the extra money to trade in Ford’s blue oval badge for the likes of Mercedes’ tristar or Audi’s rings.

By CNBC Contributor Paul A. Eisenstein. Follow him on Twitter
@DetroitBureau or at thedetroitbureau.com.

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