Large luxury cars fall from grace?

Large luxury cars are increasingly falling out of favour with new and used car buyers, according to UK-based car market analysts EurotaxGlass's -- and it's not just a Euro phenomenon.

UK sales of the four best-selling models in the luxury car class (BMW 7 Series, Mercedes-Benz S-Class, Audi A8 and Jaguar XJ) have declined by more than 25 per cent over the past five years, according to EurotaxGlass's, and the same trend is being replicated in Australia.

According to local automotive industry statistician VFACTS, year-to-date sales of the 7 Series numbered 216 until the end of September, compared to 235 for the same period last year; meanwhile, Audi's A8 dropped from 74 to 59, Jaguar's XJ slipped from 95 to 67 and Mercedes-Benz's S-Class dipped from 228 to 160.

Bear in mind that the overall market is running 5.5 percent ahead of last year and these stats assume even greater significance.

The reasons for the trend away from premium luxury cars are manifold. Arguably the biggest factor has been the advent of an ever-increasing selection of luxury SUVs, which are luring several buyers away from conventional sedans. A category that formerly comprised only the Range Rover, Mercedes M-Class, BMW X5 and Lexus LX470 has been joined by half a dozen new contenders in the last two years alone -- and there's several more in the pipeline.

And although cost of ownership isn't a huge issue for luxury-car buyers, rising fuel prices are influencing some well-heeled consumers to opt for a smaller offering -- such as a Mercedes-Benz E-class or BMW 5 Series -- in lieu of the former default choice of S-class or 7 Series.

Falling levels of demand has meant residual values of large luxury cars have been hit hard, according to EurotaxGlass's. In 2004 the average trade value of a one-year-old, 20,000km car from the sector was 67 per cent of the original list price, but today that has fallen to just 57 per cent.

This compares unfavourably to 70 per cent retained value for the typical mid-size sedan (BMW 5 Series, Audi A6, Mercedes E-Class, etc) and 73 per cent for prestige SUVs (Mercedes M-Class, BMW X5, etc).