Luxury sales hit a bump in the road

When economic worries rise, many consumers forgo life's little luxuries.

Those luxuries are getting a lot bigger.

March proved another tough month for carmakers, with overall U.S. sales declining 12% compared to the same month last year, reports released Tuesday showed. While results were bad in nearly all categories, among the larger drags were luxury vehicles, which declined 15%, according to Autodata Corp.

That decline would buck the conventional wisdom that the wealthy are largely immune to market woes. To some degree that's true, as the relative stability of $5-million-plus real estate in the face of the housing crisis has shown. But weakness in the "low-priced" luxury auto segment -- generally defined as cars costing $35,000 to $60,000 -- seems to indicate that the country's financial troubles are creeping into loftier socioeconomic climes.

"This is that middle- and upper-middle-class income group, the prime buyers of entry-level luxury cars," said Jesse Toprak, analyst for Edmunds.com.

He and others suggested that such consumers had been buying luxury cars as aspirational items, frequently using money borrowed against their houses. "It's their homes that are losing value, it's their wealth being diluted, and it's their finances getting hit the worst," Toprak said.

Tuesday's numbers seem to bear that out. Sales for Toyota Motor Co.'s Lexus division fell 18%, compared with 5.7% for the Toyota and Scion brands. Porsche was down 26%. And even Mercedes, which had a strong February, was down nearly 4%.

Ford Motor Co. saw overall sales slip 14%, but was hardest hit in its high-end Lincoln division, which fell 26% in March, worse than any major brand except Hummer.

George Pipas, sales analyst at Ford, attributed some of the slide to decreased sales to commercial fleets, but added that "the view that luxury holds up better in a recession is proving a myth. Some of the people driving these cars perhaps didn't belong in them."

There were some bright spots in the lower-luxury segment. The Cadillac CTS, which tops out at about $45,000, was up 24%, a major plus for General Motors Corp., which saw total sales plummet 19%. And Mercedes had a booming 50% increase in sales of its entry-level C-Class sedans, which start at $32,500 and were redesigned this year.