I have a friend, whom I know from my gym, who sells new Bentley automobiles.
Bentley was formerly a Rolls Royce with a less conspicuous grill. (Rolls bought Bentley in 1931. In 1935 the separate Bentley factory at Cricklewood was closed.) Today Bentley is a separate company. (It is now owned by the Volkswagen Group.) But it still sells cars of comparable quality as the Rolls and priced in the same tier as the Rolls. New 2022 Bentleys sell for between $188,000 to $308,000. Those are “starting” prices.
I recently asked my friend about sales, which had been exceptionally good throughout the pandemic and not affected by supply disruptions. His answer was unexpected. He stated that the recent slight rise in interest rates had hurt sales. That surprised me. I would have thought that the man who bought a $200,000 to $300,000 car would simply write a check for the full amount. After all, a Bentley is an indulgence, a present that one gives to oneself because one has been successful or lucky. It is the automotive equivalent of a Patek Philippe wristwatch. No one needs either. There are a lot of very good cars, and watches, one can buy for a fraction of the price. The wealthy men I know pay cash for such things.
His response: “Eighty percent of my customers cannot afford the car they buy. They do not know how to handle money.”
He stated that 20% of his customers can easily afford their new Bentley. They often have a collection of similarly high priced cars. And they write checks for the full price of the cars. But 80% of his Bentley customers can afford only a down payment. They make that down payment, not with accumulated savings, but rather with a one time windfall such as a signing bonus or big sale. They have no investments. And they then must get a lengthy car loan for most of the $200,000 to $300,000 purchase price. If I remember correctly, he told me that the average monthly payment on the new Bentleys he sells amounts to $3,500 per month. For that 80%, according to a guy who sells those cars, the appearance of having wealth is more important than actually having investments or savings that could generate wealth.
This is only the start of the problem. In my county one must pay an ad valorem tax when registering and getting plates for a vehicle. That for a $300,000 Bentley would immediately cost $19,800. Insurance on a Bentley is expensive…made more so because of the age and driving records of many of his customers. Often the cars and drivers require three separate tiered expensive insurance policies from three different companies.
Then there is the maintenance cost. As my friend said: “You cannot just take a Bentley to Jiffy Lube for an oil change. It is not an oil change. It is an ‘A Level Service’. And it costs $1,000.” All other service charges are equally expensive. But the real expense of owning a Bentley occurs after the warranty expires.
The warranty for these $200,000 to $300,000 cars is only 3 years or 36,000 miles…whichever occurs first. That’s all. Thus, the warranty expires years before the owner has paid off the car loan. After that all repair costs are out-of-pocket. Dealer repair costs for a Bentley can easily exceed $10,000. Moreover, those Bentley buyers who could not afford to pay cash for the car often cannot afford to maintain the car. They often defer maintenance, frequently ignoring glowing or flashing Check Engine lights, and thus turn maintenance issues into engine damage which can cost tens of thousands of dollars to repair. My friend stated that his dealership shop and lot is filled with Bentleys that are off-warranty but on which the owner is still making costly car payments that are parked because the owners cannot afford to pay for repairs!
Additionally the Bentley owner who is still paying for his car but cannot afford to pay for necessary repairs, and thus cannot drive it, cannot sell it either. Because of the high cost of maintenance and insurance there is little market for Bentleys that are more than three years old and off-warranty. The wealthy men who could afford them do not want them. Men who have wealth value problem avoidance. They do not want to deal with the unnecessary problems of a car that likely was badly maintained by a previous owner and is no longer reliable. They can easily buy a new model. The possible cost savings in dollars of buying a used car would never compensate for the time and aggravation of owning one. Thus, the market for a used off-warranty Bentley is very small and its sale price is usually lower than the amount owned by the buyer who had to finance it.
I had once assumed that the drivers of Rolls Royces and Bentleys were wealthy. Now I know that 80% of them are posers in debt to their ears who bought something they could not afford to own.
Still, I would like to own a 12 cylinder Bentley Continental GT Speed Convertible. Lovely car. But I would only buy it if I could justify the indulgence and pay cash, and buy it either new or very low mileage with a complete verifiable service record.
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