Under the bonnet of car price inflation

HOW much do you reckon a brand new Ferrari 458 Italia would cost in Dubai? Most would guess at around AED 1 million ($272,183), and they wouldn’t be far off. Indeed, the starting price for this car sits at AED 910,000 ($247,686), and that’s before you start putting options on it.

If you want fancy interior stitching, iPod connectivity, or even performance brakes, you’re going to have to shell out a lot more.

You would expect this from a high-end brand such as Ferrari. But how much do you reckon the 458 Italia’s predecessor, the F430, used to cost when it was brand new? Most would guess that it was around the same, give or take a few thousand dollars. But when it went on sale in 2004, prices started at AED 760,000 ($215,024). This means that the new car is 13% more expensive that the one it replaced.

Affordable cars

The above percentage may not sound like much, but when dealing with such large amounts of money, it translates into a big lump of cash. And the strange thing is that more affordable cars rise in price by smaller amounts as they move up through the generations.

Take, for example, the Peugeot 207. Brand new, this would cost AED 53,750 ($14,629) in Dubai. But the 206, its predecessor, when new, cost AED 49,900 ($13,581). That’s an increase of just 8%.

And it’s the same story across the board for relatively affordable cars. Even when you move up towards the premium end – to say, Audi, BMW or Mercedes – they are much slower to implement huge price hikes.

But why is this? Why do new performance cars sport price tags that are so much more than their predecessors?

Big improvements

One reason is that each time a performance car comes out, it has to be better than everything else currently on the market, and infinitely better than the outgoing model. This justifies the increased price.

For example, when the Ferrari 458 came out, it was far more expensive than the F430, but motor journalists heralded it as a giant leap forward, so the car was actually seen as good value for money.

This doesn’t happen when it comes to less expensive cars. The majority of car buyers want a few more luxuries (like satellite navigation or other gadgets), plenty of space and better economy from their new cars. It isn’t particularly expensive for a manufacturer such as Peugeot to provide this, and so the price doesn’t go up as much.

All about choice

Another reason behind the crazy expense of new supercars is that these manufacturers usually sport a small range of models. Ferrari only produces four different cars, and it’s the same story with Aston Martin. Lamborghini offers only two.

This means that, even at the entry level, if a new car is to be better than the outgoing model, more has to be added to it and new levels of technology have to be displayed.

With regular manufacturers, there are scores of expense levels, and most of them revolve around what a customer wants – and wants to spend.

For example, a BMW 3-series base model can stay at a relatively level price, because it will have no frills. For those who want more, they can opt for a superior version or, indeed, the 5-series.

Money no object

The main reason behind the massive costs of supercars these days, though, is that manufacturers are increasingly selling to people with little concern over how much they spend.

As prices continue to rise, so too does the likelihood that this will always be the case.

Pic credit: FreeDigitalPhotos.net

How have you found car price inflation recently? Any tips on how to beat it? Tell us!