Just because you don't have a lot of money to spend doesn't mean you have to settle for wimpy cars
Maybe gas prices will start the pendulum swinging the other way, but cars have gotten steadily more powerful for decades, from entry-level boxes like the Honda Civic to mighty sports cars like the BMW M3.
Back in 1988, the legendary M3 had a 192-hp engine. Believe it or not, that's slightly less than today's mild-mannered Honda Civic Si Sedan. Since then, power has more than doubled. The redesigned 2008 M3 produces 414 hp.
Across the board, the increase in power makes it both easier and harder to identify cars with the best performance for the least money. Easier, because even some fairly cheap cars deliver more than enough power and handling to be entertaining, like the Civic, or even more so the pocket-rocket Mazdaspeed3. The Mazda brand, with its "Zoom-Zoom" philosophy, gets good marks in performance for the money.
Rides to Make You Smile
But it's harder to single out cars that deliver bang for the buck, because there's so much more competition, in so many different product segments and body styles, including a growing number of small cars. Besides the Civic Si and the Mazdaspeed3, there are several cars under $25,000 that score high on the fun-to-drive factor, like the Mazda Miata convertible or the tiny, hardtop Mini Cooper S.
They might not win any drag races from a standing start, but those little cars make up for it with smile-inducing ride and handling. Subjectively, the convertible top wins points for the Miata, too, even though it doesn't make the car go any faster.
The notion of value for the money also depends on evolving attitudes toward what constitutes an expensive car. Automakers and dealers complain they have a hard time making money on new cars, yet car prices keep climbing. The industry tends to blame rising sticker prices on rising commodity prices, the cost of worker health and retirement benefits, and the cost of safety systems such as stability control, which automatically uses engine power and brakes to reduce the likelihood of a skid.
Performance of Utmost Importance
But consumer tastes play a role, too. There's not much practical need for a V-8 engine in passenger cars, yet many Americans tend to think anything less than eight cylinders is wimpy. That's especially true for revived muscle cars like the 425-hp, 2008 Dodge Challenger SRT8.
Performance also is a motivator for Ford Mustang buyers, says Alexander Edwards, president of automotive for Strategic Vision, a San Diego market research firm. He said almost two-thirds of 278 Mustang buyers surveyed strongly agreed with the statement: I prefer a vehicle that has the capability to outperform most others on the road. That was one of the highest such figures in the auto industry, higher than for buyers of much more expensive cars like the BMW 6 Series Convertible.
The key factor for consumers is that while cars have gotten more expensive, household incomes have climbed, too. Detroit-based Comerica Bank reported in February that the average new vehicle cost just 24.4 weeks of median family income in the fourth quarter of 2007. That's the same as in the fourth quarter of 1980. Naturally, family incomes and car prices have grown in tandem, but perception lags reality.
Crossing the Line to Luxury
Paul Taylor, chief economist for the National Automobile Dealers Assn., in McLean, Va., says the average new vehicle cost $28,797 at the end of 2007, up from $28,451 a year earlier. That's the out-the-door price. Besides the car itself, those figures include items such as the first month's payment, security deposit, and any extras, like extended service contracts—but not including finance charges over the life of a loan or lease.
That sounds like a lot. It makes adequately performing cars for less than $25,000 sound like a bargain. But if the average vehicle costs nearly $29,000, it's also no wonder luxury import brands such as Mercedes-Benz (DAI) and BMW (BMWG) are having a hard time staying below $30,000 sticker prices. The $30,000 price point has long been considered a dividing line between luxury and nonluxury brands.
BMW's solution this year is to introduce the all-new 1 Series, just below its best-selling 3 Series. The new 128i Coupe is $29,375, for instance, while the cheapest 3 Series, the 328i Sedan, starts at $33,175. Figuratively speaking, maybe $35,000 is the new $30,000.
Value in the Intangibles
It's also hard to think of cars for nearly $55,000 as "entry-level," but in a way, that's the case with two archrivals, the BMW M3 and the equally new Mercedes-Benz C63 AMG (BusinessWeek.com, 2/14/08). They are the least expensive cars from BMW's M Power high-performance division and the Mercedes-Benz AMG subsidiary.)
"The C-Class we launched a couple of months ago functions as gateway to the MB brand. In a similar way, the C63 will be entry point to the high-performance world of AMG," says Bernie Glaser, general manager, product management for Mercedes-Benz USA, based in Montvale, N.J.
Value for the money also resides in intangible items like the lusty roar of the C63's exhaust. After test-driving the car, Glaser was so happy with the sound, he said he was trying to figure out a way to make it into a ringtone for his cell phone.
If paying customers share his enthusiasm, it could take a while before gas prices dampen the desire for horsepower.
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