Are Luxury Cars Unaffordable for the Average Joe?

Have you ever wondered how so many people drive nice cars like a Mercedes E350? Perhaps they're lawyers or doctors or perhaps they understand which vehicle to buy and when to buy. So let me start off by saying that I realize that living and working in Silicon Valley puts my perspective out of wack a bit. Average salaries and the types of vehicles that people drive around here don't represent what is happening in other parts of the country, whether for better or worse. It's typical to see a bunch of Toyota and Honda vehicles on the highways but it's also quite common to see luxury vehicles such as Audi, Mercedes or BMW. In the luxury market, I personally see alot of Audi A4, BMW 328i, and Mercedes E350 around. It's not uncommon to see a few M3 or Maserati Ghibli on the highways around here either. But I want to touch on why I think that there's so many luxury cars in the Bay Area and whether it's possible for an average person to afford such a car.

The average salary in Silicon Valley is considerably higher than what others make across the country. With a large emphasis on tech jobs, salaries tend to place people into higher tax brackets as well. Cost of living is quite high and the average housing prices have been lingering around 1 million for a single family home. Nevermind that, let's talk other facts that are applicable to everyone across the country. The biggest factor to owning a luxury car is depreciation. Depreciation is a two edged sword. Buying a car new, you are going to take the biggest hit, but if you get it second hand in good condition, you can own a very nice car for much less. Let's not talk exotics or limited production cars but mass production luxury cars from the major luxury brands such as Audi, Mercedes and BMW. 

For example, it's not uncommon to find a used 2013 Audi A6 for around 30k or a 2014 E350 for similar as well. The fact is that the more expensive a mass production car is, the more it will depreciate on a dollar for dollar basis and sometimes on a percentage basis as well. If you want a used C250, 3 years used it will still cost 20k or so, but you might as why a 3 year old E350 will only be 10k more when initially new they were over 20k  or more different in pricing. The thing is that the cheaper the vehicle, the more people who are able to enter that market. If you sell a product that alot of people can afford, why would you decrease the price even further if there is sufficient demand for such a vehicle. That just doesn't make sense at all. It's all about supply and demand. The more expensive a vehicle is, it will depreciate much more. Take the Maserati Ghibli for example. New it can cost between 90k and 100k including options, but now after 2 years it will only cost around 40k  with low miles (less than 10k). The reason behind this varies from brand to brand and from vehicle to vehicle. Maserati's aren't meant to be tracked and also their reliability is not great as well. Most people cannot afford to buy this car to begin with and the used market is usually filled with people wanting a good deal after the first owner's have taken the biggest depreciation hit. With prices falling between 20k and 50k for a 3 year old Mercedes or Maserati, it becomes "affordable" to the typical Joe. While that's still a substantial amount, and I do acknowledge that in some parts of the country, 50k can get you a decent apartment or less than loved house, it's still not quite as much as if you were to buy the same vehicle new. Just by saving money from a typical job, these cars can be obtained in a few years time. 

Buying in the used market is difficult as some vehicles don't depreciate as much as others. I personally wouldn't buy a car that has known problems or if a mechanic deems it to be problematic. The trips to the dealership to get the vehicle fixed can be costly and a headache. While you may get a great deal in the end, the hassle and time it takes might not be worth it. If you're wondering how to get a luxury car, the great news is that it is not as unaffordable as you may think but it's still not cheap. With time and hard work, it can be yours. 

Some brands and specific vehicles to look at right now are the Audi A6, Mercedes E350, Mercedes GLK 350, BMW 335i, and Maserati Ghibli/Ghibli S. These cars tend to take the biggest hit and are reasonably priced around 20-50k, depending on location and mileage. If you look hard there are deals to be found. Whenever possible I would suggest looking at certified pre-owned as they usually have an extended warranty and a few hundred point inspection making sure that the vehicle has no major issues.