By Thaler
Bentley’s boss blamed the British luxury carmaker’s slumping sales on “a level of emotional sensitivity” among its wealthy customers – before announcing that he is jumping ship to a rival on Friday.
Adrian Hallmark, who had been in the driver’s seat at Bentley for six years, said sales plunged 11% in 2023, the first decline after four consecutive years of sales growth.
“Even though our customers can still afford our cars, there was a level of emotional sensitivity that slowed down demand,” Hallmark told CNN.
The carmaker – long a favorite of the upper crust as well as the late Queen Elizabeth for its elegance — will no longer have Hallmark at the helm. He is moving on to run rival luxury brand Aston Martin, effective Oct. 1.
The company also attributed the lower sales on its high-earning customers being worried about “the possible gaucheness of being seen in a shiny new Bentley if friends, family or employees are facing increased economic hardship.”
In addition, customers are sensitive to “the change in interest rates, [which] raises their payments when they get a quote to change the car. The customer may be able to afford it but somewhat resents why they should pay more. Or thinks that interest rates will go down and decides to wait,” the Bentley spokesperson added.
To prove that even moneyed buyers were sensitive to monthly payments, the company rep said that 30% of customers leased Bentleys in 2023 – “up significantly” compared to 2022, per CNN.
For consumers at all income levels, monthly car payments have reached record levels in recent months as the Federal Reserve has kept interest rates at a 22-year high in attempt to ease inflation.
At the central bankers’ latest meeting concluded on Wednesday, the Fed’s benchmark overnight interest rate, as expected, was held steady between 5.25% and 5.50%, where it’s sat since July.
In the fourth quarter of 2023, the average monthly payment on a new vehicle in the United States was $739 on a 68-month loan, CNN reported, citing Edmunds.com.
However, payments on luxury cars like a Bentley, which typically retails for between $210,000 and $225,000 and beyond, can be much higher.
For drivers with the best credit scores of at least 750, average interest rates are about 5.64% for a new car and 7.66% for a used one, according to Bankrate.
Buyers with credit scores of less than 600, meanwhile, are looking at distressing interest rates as high as 14.78% and 21.55% for new and used cars, respectively.
Leasing a car often means cheaper monthly payments for customers who, in a lease, pay a monthly fee based on the vehicle’s value, the principal owed each month and time the lease ends, plus fees and interest.
The average 36-month lease payment for a Bentley Bentayga SUV, the brand’s most popular model, is around $4,250, CNN reported, citing auto website TrueCar.com.
Squeezed US drivers are defaulting on their auto loans at record levels.
According to the New York Fed’s Center for Microeconomic Data’s Quarterly Report on Household Debt and Credit, auto loan balances increased by $12 billion in the three-month period ended Dec. 31, 2023.
In recent years, the average origination amount – the borrowing amount of a car loan – has also surged year-over-year, the NY Fed reported.
Though the origination rates had crept up slowly at a pace under 1% between 2015 and 2020, they surged by 11% in 2021 and 10% in 2022, when the average origination amount on auto loans was nearly $24,000.
Also in 2022, Fed officials began their rate-hiking campaign to combat the worst bout of inflation in four decades.
However, not all luxury car brands have suffered as a result.
Though Bentley sales were down, costlier rival Rolls-Royce sold just over 6,000 vehicles last year – an all-time record for the automaker, whose models are priced at a minimum of $350,000, according to CNN.
In addition, Bentley’s corporate relative, Lamborghini – which is also part of the VW Group brand – experienced an all-time record year last year after selling more than 10,000 vehicles for the first time in its history.
Lamborghini and Ferrari also earned a record profit of about $789 million and $1.36 billion, respectively, CNN reported.
Lamborghini CEO Stephan Winkelmann attributed the company’s success to an increased number of ultra-wealthy people around the world.
