What Makes Luxury Cars So Expensive?

http://www.quora.com/What-makes-luxury-cars-so-expensive - What makes luxury cars so expensive? - : originally appeared on http://www.quora.com" target="_hplink - Quora - : The best answer to any question. Ask a question, get a great answer. Learn from experts and access insider knowledge. You can follow Quora on https://twitter.com/Quora - Twitter - , https://www.facebook.com/quora - Facebook - , and https://plus.google.com/111127313006403749982/posts - Google+ - . http://images.huffingtonpost.com/2015-03-19-1426790085-6064535-jasonlancaster.jpg - - http://images.huffingtonpost.com/2015-03-19-1426790805-4638738-1.jpg - - Toyota, for example, spent over $2 billion developing their Tundra pickup truck, at least if you count the cost of the factory they built for the truck in San Antonio.These costs have to be amortized across every vehicle sold. As a result, a limited production vehicle absolutely must cost more than a mass produced vehicle. If you take $1 billion dollars in product development costs, for example, and spread that across a vehicle model that sells about 10,000 units a year for 5 years, you're looking at $20,000 per car just to break even (ignoring the time value of money and ROI expectations set by the automaker). Not to mention, you still have to actually buy all the parts and put them together in a factory! You're $20k in the hole before you even think about starting to build the car...and that assumes you're going to hit your sales projections (which is never guaranteed).Summing up, the math is pretty simple once you understand the facts.Individual vehicle models often cost hundreds of millions of dollars to develop, not counting the costs of setting up a manufacturing plant, hiring assembly workers, etc. The total cost is easily1 billion per vehicle, often more.These costs must be amortized across every model sold.If the model is sold in very low volumes (say, 10,000 units a year), a good portion of the selling price goes towards covering development costs.If the model is sold in very high volumes (say, 300k units a year), the amortized development cost per vehicle is tiny...which is why the F-series truck, Toyota Camry, Honda Civic, and other popular models are so "cheap" (relatively speaking).While the costs of building a car with luxury options and features is higher than building a car with no luxury features, the cost difference is small.Basically, luxury cars are more expensive because you're http://www.zimbio.com/photos/Sherlyn+Popelka - best search sites - paying for exclusivity. The more exclusive (fewer models sold) the car, the more the automaker has to charge each buyer for their design, development, and assembly costs.P.S. Now that you know how it works, you understand why all automakers chase sales volume. The more they can grow their sales, the lower their effective cost per vehicle sold.More questions on http://www.quora.com" target="_hplink - Quora - : http://www.consumerreports.org/cro/cars/suvs.htm - http://www.consumerreports.org/cro/cars/suvs.htm -