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Would you buy a $48,000 Hyundai?

By Claes Bell, CFA · Bankrate.com
Thursday, June 10, 2010
Posted: 11 am ET

With the approaching debut of its Equus model, Hyundai is headed farther down a path taken by many foreign automakers with varying levels of success: creating a luxury line of cars to compete in the U.S. premium market. The Korean automaker is betting big -- it spent $260 million just developing the all-aluminum V-8 that will go into their luxury vehicles -- that Americans will pay upward of $48,000 and beyond for a Hyundai Equus.

The Hyundai Equus.

The luxury Hyundai Equus. Photo courtesy: Hyundai.

Why risk all that money to muscle into the market for luxury sedans, one of the most competitive sectors of the U.S. automotive landscape? It's simple: Luxury is a cash cow for whoever can successfully produce it. For every top-of-the-line Lexus that Toyota sells, they make 10 times the cash they get from selling a Toyota Corolla, according to a recent Bloomberg article.

That's because when a consumer buys a luxury sedan, they're not just paying a premium for extras like leather and wood. Sure, those extras figure into the cost of the car. But that doesn't account for the entire markup. When customers pay $40,000 or more for a car, they're buying the prestige of a premium brand. And since that prestige doesn't add extra manufacturing costs for Toyota, it means bigger profits.

For example, take the Toyota Camry. It's considered universally to be an above-average family sedan -- quiet, strong engine, large and comfortable interior. With all the bells and whistles -- leather, wood, navigation, 250-hp V-6 engine -- it comes in at $31,334.

The Lexus ES, built on the same platform, virtually the same engine (sans 22 hp) and similar creature comforts, starts at $35,175. What does the extra $3,841 buy you? Lexus people would probably say service, etc., but what it really buys is that little slanted "L" on the grill of your car, which signals to the world that you can afford a premium vehicle.

That big markup is the brass ring Hyundai is chasing, and who can blame them? Right now, they probably aren't charging the type of brand premium Lexus can command; their Genesis sedan retails at $39,500 for the V-8 model, considerably less than comparable models from established luxury brands. Just as Toyota did with its once-upstart luxury brand, Hyundai is offering big value to get its foot in the door in the U.S. market. But at some point, will it get to start charging extra for the cache, as Lexus now does? Will people be willing to pay thousands for a circle H on the grill rather than, say, a blue-and-white propeller or a three-point star?

Only time will tell, but so far the Genesis is selling  reasonably well; it's seen a modest increase in sales over 2009 so far this year, and the company plans to push ahead with its Equus, which will start at $48,000, fancy hood ornament and all, later this year.

Would you consider buying a luxury car from Hyundai? Is cache important to you when buying a car, or do you think it's silly to pay extra for branding?

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9 Comments
Keith Rogers
July 03, 2010 at 12:49 am

I saw this car in person when I was down in Seoul.....yes, I would absolutely own on when I have to means to buy a $60K sedan. But for now, I'm perfectly happy with my 2011 Hyundai Sonata Limited.

derick
June 14, 2010 at 5:21 pm

Heck no. Unless you want to through away bucket's of money.

Stephen
June 12, 2010 at 10:33 am

Part of the appeal of a luxury car from a luxury brand is that it serves as a status symbol, a goal that no Hyundai could ever meet. $ 50,000 for a Hyundai no matter how good it may be is a complete waste if you're looking for any kind of brand prestige.

Also- in reference to a prior post regarding Lexus and their corresponding recalls making them less desirable- now is likely the best time to purchase one as dealers are anxious to move them and all safety issues have been addressed.

Debbie
June 11, 2010 at 9:55 pm

I've owned Lexus brand cars, four of them, for 10+ years. Service, reliability and ride comfort make the choice a no brainer. If H can make it to the top of Consumer Reports luxury or near luxury ratings I would change.

fasn8n
June 11, 2010 at 10:50 am

Why pay $48k for a Hyundai when I could buy a nice CPO Mercedes or BMW that has already taken the depreciation hit?
I have to give Hyundai credit for coming a long way over the years, but there are a ton of other cars I would rather own for almost $50k

Bob
June 11, 2010 at 9:41 am

My hyundai genesis is great.lol..
i love it

Bjorn
June 11, 2010 at 8:57 am

Claes is right on. I recognize this would be too expensive and risky a proposition for Hyundai, but if they want to charge 50 grand for a car, they should roll out a luxury brand like Toyota/Lexus, Nissan/Infiniti. As was stated, one of the reasons people buy expensive cars (aside from the comfort and performance discussion) is akin to waving money around on a stick. Hyundai doesn't command looks, so nobody's going to be buying.

Dave Suton
June 11, 2010 at 2:42 am

No way. I wouldn't pay more for the Toyota either. You have to be pretty stupid to buy a Lexus, along with all of the recalls, today. Lexus, Infinity, and Acura are cars for the "gold chain party store owner" set.

mathew
June 10, 2010 at 8:38 pm

I have owned a Hyundai before. Every 15000 miles I would have to take it in to the dealer to have the transmission worked on because it would stop shifting. Once it hit 90000 miles I traded it in for a different car. I did not want to have to pay for a repair on a transmission at 105,000. No thanks on a $48000 hyundai. I paid less than $12000 for mine. Other than that the car was fine.