The Luxury Car Market Is Declining from the Upper Echelons

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      If you regularly read The Drive, you might have noticed we conclude our articles by mentioning that we are always looking for news tips. While this leads to numerous pitches for quirky air fresheners and AI-generated content, we sometimes receive eye-catching insights. Want to get noticed by our editorial team? Start with an opener like this:

      “I’m curious why I haven’t seen any articles on the crash of the ultra-luxury market.”

      That statement is substantial and grabbed our attention for two reasons. First, it came from a reputable source—whose identity we won’t disclose since we promised anonymity in return for their valuable insights. Here’s a glimpse of what they shared.

      “Lamborghini is not selling,” they explained. “Bentley has struggled since 2024. Aston Martin’s clients love their Valhallas, but other than that, sales are poor.”

      Additionally, they provided reasoning behind these observations.

      What’s Happening?

      “People are no longer seeing the value as prices have skyrocketed for all these brands. Clients are complaining about lease payments—many would need to pay an extra $2,000 a month to upgrade to a new vehicle that’s essentially the same as their current one,” they said.

      This situation is leading to a decline in the market from the middle out. So far, traditional “S-tier” brands (such as Ferrari and Bugatti) remain unaffected by this trend. At that level, market trends are largely irrelevant, but even affluent buyers aren't eager to spend at this moment.

      “And depreciation is outrageous,” they remarked. “Clients may be wealthy, but they’re not foolish.”

      If this trend impacts those wealthy enough to overlook it, it naturally follows that the pressure is felt across the entire sales spectrum. This brings us to the second reason why this insider’s email stood out: they aren’t the only one raising concerns. Kelley Blue Book contacted us the same week with insights into July’s sales numbers, revealing clear underlying trends.

      Price Pressures

      Since COVID, prices have generally been on the rise. Until recently, customers absorbed these increases without much choice. However, at some point, likely within the past year, we reached a turning point. Now, faced with higher sticker prices and rising fuel costs, customers are shifting to smaller, more affordable options.

      “Consumers are continuing to move toward more affordable segments, with subcompact SUVs, compact cars, and midsize cars all showing sales increases compared to the previous year,” the summary of KBB’s report noted.

      Significantly, KBB pointed out that average transaction prices didn’t increase as much in July as they have in recent times, but this isn’t due to a decrease in sticker prices. Instead, it’s because buyers are simply refusing to be upsold. In fact, the shift has been so significant that demand is keeping prices high for mainstream, “affordable” models while larger, pricier alternatives are being overlooked.

      “That shift is helping maintain overall price growth, even as four out of five best-selling segments reported average transaction price gains that surpassed the industry average,” the report continued.

      In essence, customers are still overpaying for cars, but they’re doing so for smaller, more efficient models rather than opting for larger, more luxurious options. The interpretation of “luxury” may become vague in 2026, but “small” and “more affordable” typically aren’t included, which poses challenges for luxury market dealers.

      Consequently, automakers with significant exposure to the high-end luxury market (like Volkswagen and Mercedes-Benz) are feeling the strain more than those whose offerings lean toward the masses (such as BMW). Transaction prices are still rising, but brands are experiencing sales declines at an unsustainable pace.

      The Numbers

      Just how bad is “bad?” Typically, the upper echelon of the luxury segment is where manufacturers enjoy substantial margins that help justify corporate investments in prestigious models. Mercedes doesn’t need to sell 10,000 Maybach SLs each year to stay afloat, as they are significantly more profitable than the average Benz on a unit basis.

      However, even with robust margins, luxury brands need to maintain a certain volume. For instance, Porsche has spent recent years boasting about its brand expansion, but 2025 appears to represent a turning point. Not only did its global sales decline last year (largely attributed to a faltering Chinese market), but the company barely posted a modest increase over its 2024 performance in the United States. Given the strategies we’ll discuss further, even that outcome seems questionable.

      Meanwhile, U.S. sales of Porsche’s certified pre-owned vehicles rose 11% in 2025—another indication that customers are looking for bargains. According to various sources, many customers have also become disillusioned with Porsche’s inventory allocation system after dealers linked the availability of high-demand 911 variants to purchases of less