Are Consumers’ Demand For Luxury Interiors Driving Prices Up?

In an age of living a luxurious life, even for those living well beyond their means, we’re seeing prices gradually moving up, pinching middle class consumers in the process. The automotive market is one of those industries in which we’re witnessing the inflation of car prices. Vehicles that shouldn’t be priced any higher than $16,000 – $18,000 are nearing $20,000+, and consumers are beginning see how buying a 1-2 year old used car is a better fiscal decision than walking into the dealer and driving off the lot in a brand new car. But are consumers partially to blame for the uptick in vehicle prices?

Europeans are known to prefer luxury and driving experience over flat-out performance, which is why European auto makers produce more expensive cars that capture the very best in what the automotive world has to offer. Over the years we’re seeing this trend beginning to grow in the United States as flat-out performance is not selling as quick as luxury, something Cadillac refuses to see as they’re marketing performance first and their sales figures are dropping because of that. Muscle cars have made a slight rebound with the emergence of the Dodge Charger and Challenger Hellcats, the new fastback Ford Mustang, and the Chevrolet Camaro which will be sporting a new look next year.

If you’ve been to car shows recently you’ve noticed that interiors of low-end cars now have an upscale appeal. The Mazda3 and Mazda6 have very comfortable and luxurious interiors, which is a slight shock considering that they’re not a luxury brand. The Honda Civic EX-L, priced around $25,000, has an amazing interior, and if you forget about the engine that it has, you’d have to say that it’s a very impressive car. This leads me to the Toyota Yaris, which some trims cost near or exceed $19,000. That’s absolutely outrageous as this is the Hyundai Elantra GT’s price range territory. True, it gets less gas mileage than the Yaris, but why buy a micro hatchback when you can buy a full size for the same price?

The interiors and their infotainment systems are partially to blame, but so are the consumers. Bluetooth, navigation systems, electric sunroofs, touch displays, and premium cloth or leather seats all factor into the price. The reason why cars like the Honda Fit and Toyota Yaris are considered economical cars is because they’re supposed to be cheap while also offering great gas mileage. Not in 2015. While you have the option to buy the base model, $16,000 is still no drop in the bucket either. Which raises the question as to why consumers would buy new in this current market? Leasing offers have become more appealing than buying, and you actually end up with a better car for 24-36 months than if you bought a car for $18,000.

The luxurious lifestyle is great, but are we living way beyond our means? The Mazda3 was once affordable, a rival to the Ford Focus. Now a top trim Mazda3 is impeding on the Chrysler 200’s territory. For those who do have the money to buy a $25,000+ car, this is a great time to buy. Instead of spending $40,000 on a Mercedes Benz or BMW, you can get an upscale interior for a fraction of the cost. In the sure sense of practicality, a top trim Mazda3, Subaru Impreza Premium, or a Honda Civic EX-L is a much better option, and you don’t break the bank buying a car that offers every infotainment system on the market.

Car companies have their reasons for spiking the prices of cars, but consumers’ demands for luxury interiors and infotainment systems have been a cause for more expensive cars that were once affordable. Whatever happened to the days when we’d get in our cars, turn on the radio, roll the windows down, and enjoy the driving experience? Owning a luxury car is by no means a bad thing, but we’re continuously outdoing ourselves by demanding luxury in cars that are nowhere close to being upscale.

The Subcompact Market Isn’t As Cheap As You Think

Who would have ever thought that we’d see a day when a Toyota Yaris and Mitsubishi Mirage cost $16,000 – $17,000? That’s just a base price. The top trim Yaris could cost you as much as $19,000, and all you’re getting for it is 106 hp, 32 combined mpg, a touch screen and bluetooth. There isn’t much cargo room, very little shoulder and leg room, and at the end of the day, you’d be better off buying a Honda Fit. When does the cost for sub compacts become unreasonable, especially since we’re talking about a market that attracts consumers who want overall practicality?

The problem with the price is what the subcompact car is offering. Yes, to add features like a touch screen and bluetooth is great, but what is the overall goal with this market? To be practical in every sense of the word. For starters, the price isn’t practical. Not when it comes to the other options on the market. In a matter of 8 years, the Yaris’ price has spiked $3,000, and while MSRP says the base price is around $16,000 for the 2015 model, Toyota dealers are selling some of them close to $19,000+.

Without even looking to other brands, the Yaris’ top trim price is invading the Toyota Corolla’s territory. One could argue that the Honda Fit does the same to the Civic, but at least the Fit has cargo room and offers more value to the consumer. With President’s Day sales extended into March due to the snowstorms we’ve gotten in the Northeast, there are better options consumers could go with, and while fuel economy might be lacking, some of the cars are not too far off from the Yaris’ 32 combined mpg.

Some of the other options in the $17,000 – $19,000 price range are –

Toyota Corolla L/LE/S

Honda Civic LX

Honda Fit LX/EX

Ford Focus SE

Ford Fiesta SE

Those five vehicles are better options in terms of cargo space, shoulder and leg room, and fuel economy isn’t too bad. The list could be extended even further, but I think you get the picture as to what you could get at this price if you decided to buy new.

Due to sales events going on currently, the Hyundai Elantra SE/Sport and the Elantra GT are within the $18,000 to $19,500 range. The Subaru Impreza sedan and hatchback are also available within this price range, along with the Volkswagen Jetta S /w Technology Package, and even the Chrysler 200 limited which is one of the biggest surprises so far to have such a sale.

After seeing the prices, the subcompact market doesn’t seem so reasonable or practical anymore. If owning a small car is a must and you’re not concerned about cargo space, then by all means go with the Yaris or Mirage. But always remember that there are some great offers out there, and better cars to choose from than going the subcompact route.

If you prefer a small hatchback, the Fiesta, Fit, VW Golf, Elantra GT, and Kia Rio are other options on the table. In the sedan market, some dealers even have Ford Fusion’s, Toyota Camry’s, and Hyundai Sonata’s on sale for $3,000 to $4,000 below MSRP. Right now is the time to buy and take advantage of some of the deals. On a $16,000 – $19,500 budget, you could find a quality car that not only looks better, but is better built and worth the price.