While climbing the corporate ladder, the luxury car in the driveway may represent a symbol of success, but with mortgages, schooling, kids' activities and other expenses competing for their paycheques, many families can't justify $70,000-and-up for a vehicle purchase.
Top-end cars are aspirational purchases, creating a market opportunity that premium car makers are exploiting with the premium entry-level car.
These automobiles are priced at the bottom end of the brand, yet still carry the vaunted badge on the hood: a Mercedes in the driveway for the price of a loaded Ford.
"The reason you want market expansion is to bring in a new buyer to the brand, a younger buyer," says Robert Karwel of J.D. Power and Associates. "You capture them at that point when they're much earlier in their lifetime buying cycle and hopefully you'll have a repeat customer who will buy a more expensive vehicle as their demographic changes. They increase in income and come back for feature automotive purchases."
Porsche also offers entry vehicles, though, at more than $50,000, the Macan S and Boxster are hardly mainstream affordable. But they get people into the brand; consumers can have a car with the same badge as the 911.
"They're obviously the gateway in terms of pricing," says Alexander Schildt, director of marketing at Porsche Canada.
"It is important that every luxury brand should have a defined entry point. If your prices start at $500,000 for a watch, then, yes, you will have a very small, very exclusive customer group, but you'll find it very hard to expand that customer group," says Schildt. "Obviously, the future growth in the upmarket models is depending on these feeders."
Entry-level cars are the first step toward brand loyalty – "customer journeys," as Schildt calls them – clients who work their way through other Porsche cars during their lifetime. The company is developing a method of compiling and tracking these journeys to help in marketing.
"Because we have a very substantial rate of brand-loyal customers, it's more and more important for us to understand how this journey tracks and where it ultimately leads to, understanding the promotion mechanisms and the point of time in their lives when they go to certain models," Schildt says.
"We'll use this information as soon as it's in a more structured form to cater to the customer in a more on-target way as opposed to putting an ad somewhere and hoping someone looks at it."
J.D. Power and Associates data show that 64.8 per cent of people who enter the premium entry market lease, which indicates that consumers may be desperate enough to extend themselves financially to get into the bottom rung of the market. And that, in the next three to four years, they'll be looking for another car. The latter highlights the importance of building brand loyalty.
And it's working: More data show that, of those who bought a BMW 1 Series (which is no longer available) in Canada, 38 per cent went back to the brand for their next car; of those, close to two-thirds bought a bigger BMW.
Karwel notes that buyers of premium entry cars will have fewer features than if they had bought a larger, fully optioned mainstream car for a similar price – and adding options will add thousands of dollars to the bottom line. But there are other perks, such as getting a higher level of luxury service.
Ultimately, there is one reason that drives people to the lower rungs of the higher brands.
"We talk about image and brand first," says Karwel. "It's definitely about portraying the right badge on the front of your car, sort of announcing that you've made it and you have a certain status."
Five examples of entry-level cars from luxury bands and what you get for the price:
BMW 320i
The 320i is BMW’s least expensive car outside of the Mini brand, starting from $35,999. For that, you get a 181-horsepower four-cylinder, leatherette seats and a choice of black or white. Add a single dollar to this price for the smaller 228i Coupé with 241 horsepower.
Mercedes-Benz B 250 Sports Tourer
For $31,300, this four-door hatchback has 208 horsepower, a seven-speed automatic transmission and a choice of three colours. Standard features are thin but include rain-sensing wipers, cruise control and paddle shifters. For an additional $3,300, you can step up to the base model of the more stylish CLA 250.
Audi A3 Coupé
At $31,600, the A3 is a sharp-handling, fun car despite being a front-wheel-driver and having just 170 horsepower. It has a high-level interior and good fit and finish, but if you want Audi’s quattro all-wheel drive, you’ll have to fork out almost $8,000 more for the upgraded 220-horsepower engine.
Porsche Macan S
Yes, $54,300 for the Macan S is hardly entry-level pricing, but you get 340 horsepower from its 3.0-litre V-6 and a seven-speed, dual-clutch gearbox. Plus, it’s arguably the best small crossover on the market when it comes to driving dynamics.
Lexus CT 200h
The entry for Lexus is a hybrid hatchback based on the Toyota Prius, starting at $31,050. The CT 200h may be frugal at the pumps but it’s not exciting, with just 134 horsepower under its hood. But it does come well equipped in base form, with dual-zone climate control, satellite radio and keyless entry.
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