The term suggests a vehicle with higher quality equipment, better performance, more precise construction, comfort, higher design, technologically innovative modern, or features that convey an image, brand, status, or prestige, or any other 'discretionary' feature or combination of them. The term is also broad, highly variable and relative. It is a perceptual, conditional and subjective attribute that may be comprehended differently by different people; "What is a luxury car to some... may be 'ordinary' to others."
In contemporary usage, the term may be applied to any vehicle type— including sedan, coupe, hatchback, station wagon, and convertible body styles, as well as to minivans, crossovers, or sport utility vehicles and to any size vehicle, from small to large—in any price range. Moreover, there is a convergence in the markets and a resulting confusion of luxury with high price: where there may have been a clear difference in price between luxury and others, there is no longer an absolute separation between premium and luxury, with what may be premium brands now more expensive than the equivalent so-called luxury ones.
Automobile manufacturers market specific makes and models that are targeted at particular socio-economic classes, and thus "social status came to be associated more with a particular vehicle than ownership of a car per se." Therefore, automakers differentiate among their product lines in "collusion" with the car-buying public. While a high price is the most frequent factor, it is "styling, engineering, and even public opinion which cars had the highest and lowest status associated with them."
Every era in automobile history has had "a group of car marques and models that have been expensive to purchase, due to their alleged superiority of their design and engineering". Aimed at wealthy buyers, such automobiles might be generically termed luxury cars. This term is also used for unique vehicles produced during "an era when luxury was individualistic consideration, and coachwork could be tailored to an owner like a bespoke suit." Although there is considerable literature about specific marques, there is a lack of systematic and scholarly work that "analyzes the luxury car phenomenon itself."
Luxury vehicle makers may either be stand-alone companies in their own right, such as BMW and Mercedes-Benz, or a division/subsidiary of a mass market automaker (e.g., Lexus is part of Toyota). Badge engineering is often used for cost savings, for example, the Lincoln vehicles that are based on Ford platforms or Acura models derived from Honda.
Though widely used, the term luxury is broad and highly variable. It is a perceptual, conditional and subjective attribute and may be understood differently by different people: "What is a luxury car to some... may be 'ordinary' to others."
According to the European Commission, the "luxury vehicle" segment is classified as F-segment. However, the boundaries between the traditional segments are increasingly becoming blurred and diluted as features once exclusive to luxury vehicles become standard equipment on even small cars.
The premium compact class is relatively new, having been initiated by several European brands in the mid-2000s, and have displaced their compact executive cars to constitute the least expensive offerings in their lineups. The classification varies, for instance Consumer Guide Automotive in the U.S. considers the Audi A3 and Mercedes-Benz CLA-Class as part of the premium compact segment due to similar size and MSRP, though these are known in Europe as a small family car and a compact executive car, respectively. Adding to some confusion, General Motors has positioned Buick as a "premium" nameplate to compete with Lincoln (whereas it formerly competed with Mercury) and front-wheel drive Acura and Lexus models, while Cadillac is aimed at the "luxury" segment which generally encompasses the performance-oriented BMW and Mercedes-Benz marques.
The premium compact segment is targeted at a niche market of consumers who found the existing entry-level luxury offerings (mostly consisting of compact executive cars - see below) to be too expensive. By offering a smaller, lighter, more fuel-efficient, and less expensive vehicle, premium compacts introduces younger buyers to the luxury marque, in hopes of retaining the coveted customer loyalty. This includes the Acura CSX, Audi A3, Buick Verano, BMW 2 Series, BMW i3, Cadillac ELR, Chrysler 200, Lexus CT, Mercedes-Benz CLA-Class, Mercedes-Benz B-Class, Saab 9-2X, and the Volvo V40. Premium compacts compete with well-equipped midsize (non-luxury) cars, and with options they overlap much with compact executive cars (entry-level luxury cars).
Premium compacts may share components with mass market cars from the marque's parent company (the Audi A3 for example, shares much of its engineering with the cheaper Volkswagen Golf), and/or have less sophisticated platforms compared to upmarket vehicles in the lineup (such as the Mercedes-Benz B-Class which is front-wheel drive compared to the other marque's more expensive cars that are rear-wheel drive). However, the BMW 1 Series retains the front-engine longitudinal-engine rear-wheel drive configuration of more expensive BMWs.
The body style tends to be a hatchback or compact wagon, previously associated with economy cars but regaining popularity in the United States for its afforded utility. As of 2013 there are small luxury sedans such as Audi A3, and Mercedes-Benz CLA-Class. The luxury branding and style, high-quality interior materials, wide range of convenience features, and performance powertrains are key to distinguishing them from mass market equivalents (one mistake made by the Cadillac Cimarron) and making these appeal to consumers.
This category is known as the compact executive car in Britain where it specifies both the price range and vehicle dimensions. In the U.S., there is a broader category called entry-level luxury, which includes the bottom vehicles in the line-up of luxury brands as well as the top-of-the-line models of some non-luxury brands. Dimensionally, compact executive cars are smaller than Mid-size cars and sometimes even smaller than compact/Small family cars. Mass market compact cars typically use the economical front wheel drive transverse engine layout, well suited to the inline-4 engine, which also maximizes interior room. Most compact executive cars are rear-wheel drive with longitudinal engines, for improved stability and handling, and in order to accommodate the larger size of higher-performance engines (straight-6, V6, rarely V8), with four-wheel drive often being available. Compact executive cars also tend to have more complicated independent suspensions, sportier transmissions, and high revolution engines that may require premium gasoline. The more complex powertrain and mechanical layouts of compact executive cars comes at increased cost and reduced interior passenger and trunk space. Compact executive cars include the Acura ILX, Alfa Romeo Giulia, Jaguar XE, Volvo S60, Lexus IS, Infiniti Q40, Saab 9-3, BMW 3 Series, Audi A4, Cadillac ATS, and Mercedes-Benz C-Class which particularly emphasize sporty handling.
The American and Canadian classification of entry-level luxury (formerly dominated by premium marques e.g. Buick, Oldsmobile, Mercury, Chrysler) is a broad category which includes not only compact executive cars, but also midsize to large cars and SUVs such as the Lexus ES, Acura TL, Buick LaCrosse, Lexus RX being similar in price to the BMW 3 Series and Mercedes-Benz C-Class. However, the ES, TL, and LaCrosse do not fall under the European luxury classification of compact executive car nor are they sold in Europe. The ES and TL actually began as badge engineered versions of the mid-size Toyota Camry and Honda Accord, respectively, retaining the front wheel drive transverse engine layout, whereas Toyota's current Lexus IS does not share a platform with mass market Toyota cars. The ES and TL are not considered executive cars either (that slot is filled by the Lexus GS and Acura RL, respectively), despite similar dimensions, since executive cars usually emphasize higher performance, often being rear-wheel drive with longitudinal engines. The present iterations of the ES and LaCrosse emphasize "comfortable, reasonably priced luxury", while the TL has recently been targeted at the entry-level luxury sport market due to its SH-AWD.
Recently, the entry-level luxury has been very competitive, and there has been price-overlapping with well-equipped non-luxury cars. The bestselling vehicles of the marque are frequently compact executive cars, such as the BMW 3 Series that makes up 40% of the vehicles that BMW sells worldwide.
The mid-size luxury segment is commonly referred to as executive cars in Britain, Obere Mittelklasse in German, and Grandes Routières in French. Examples of models in this category include Acura RLX, Audi A6, Audi A7, Volvo S80, Volvo S90, Genesis G80, BMW 5 Series, Mercedes-Benz E-Class, Jaguar XF, Maserati Ghibli, Cadillac CTS, Lincoln MKZ, Saab 9-5, Lexus GS, and Infiniti Q50. Although Maserati vehicles have traditionally been priced as ultra-luxury cars, the new Maserati Ghibli III is intended to compete with high-spec executive cars, such as the Audi S6/S7, BMW 550i and Mercedes-Benz E550/CLS550.
Although having similar dimensions to mid-size cars and large family cars, executive cars are engineered and positioned as premium vehicles with better performance and technology amenities. There are also higher development and production costs, as many well-known mid-luxury cars use the longitudinal (usually front engine rear wheel drive layout) engine mounting which affords space for powerful engines such as a V8, instead of the more economical transverse engine layout of mass market cars which are restricted to inline-4 or V6. Executive cars usually have lower sales and production volumes compared to mid-size cars, as base trims with less equipment and smaller engines are not sold in U.S. and Canadian markets. Also due to the problem of steep depreciation, especially concerning cars from less prestigious brands, most executive cars are produced by marques that specialize in larger/more expensive vehicles. Particularly in the United States, the mid-luxury segment is dominated by Mercedes-Benz and BMW, as executive cars from lesser-known manufacturers such as Citroën and Infiniti have not had much success.
Vehicles in this segment include the mid-range models of several luxury car manufacturers. Executive cars such as the BMW 5 Series are crucial to a luxury automaker's bottom line, and although not the highest-selling model, they generate a significant amount of profits due to the lucrative technology options.
Also known as full-size luxury cars, grand saloons, flagship car, or premium large cars, while "Oberklasse" is used in Germany. Many of these are the marque's showcases for the newest automotive technology. Several nameplates also offer long-wheelbase versions that offer additional rear legroom and amenities. Full-size luxury cars sold in Canada and the U.S. typically have mid-displacement V8 engines, though recently some marques have offered six cylinder powerplants but without much success.
Vehicles in this category include some of the models from the flagship lines of luxury car brands. In Europe, this includes the Audi A8, BMW 7 Series, Porsche Panamera, Volkswagen Phaeton, Maserati Quattroporte, Mercedes-Benz S-Class, and the Jaguar XJ. In Japan: Acura RLX, Lexus LS, and the Infiniti Q70. In Australia: HSV Grange / Holden Caprice. In South Korea:SsangYong Chairman, Hyundai Equus, Genesis G90, Kia K900, in the US: Lincoln Continental, Chrysler 300, Tesla Model S, Cadillac XTS, and the Cadillac CT6. In the United States in 2004, the bestselling full-size luxury nameplates were the Lexus LS, Mercedes-Benz S-Class, and BMW 7 Series. There were also full-size luxury cars in the Soviet Union since 1930s until the 1990s, from the GAZ and ZiL (before 1956 - ZiS) factories, such as ZIS-101, ZIS-110, GAZ 12, GAZ 13 Gull, ZIL-114, ZIL-117, ZIL-4104, ZIL-41047.
R.L. Polk and Company, a global automotive information and marketing firm that provides services to automotive and related industries, has defined the term "super luxury" segment for luxury cars costing more than US$100,000.
This bracket includes the full lineups of Aston Martin, Rolls-Royce and Bentley, as - unlike mainstream luxury brands such as Audi, Porsche, BMW, and Mercedes-Benz - these marques do not offer lower-priced, entry-level luxury or mid-luxury cars. As of late 2011, super luxury automakers have been "pledging higher sales and offering ever sexier models" despite the economic uncertainty.
Bentley and Rolls-Royce have recently moved into more affordable price brackets with new models priced considerably lower than their traditional offerings (Bentley Mulsanne and Rolls-Royce Phantom and Maserati Quattroporte). These new cars, the Bentley Flying Spur and Continental GT sister cars and Rolls-Royce Ghost, created what Car and Driver described as the "entry-opulent segment". Bentley, Maybach, and Rolls-Royce vehicles share platforms and derivatives of engines with other luxury brands from their parent auto company, however Rolls-Royce and Bentley are assembled in England (separate from the rest of BMW and Volkswagen Group's production plants) and this 'exclusivity' has helped to make these British marques a sales success. By comparison, Maybachs were built alongside the Mercedes-Benz S-Class which partly explains why they have not fared well in the market and were discontinued in 2012. Furthermore, the Maybach's brand pedigree was virtually unknown outside of Germany unlike its British rivals which have long enjoyed fame worldwide. A Bentley executive was quoted as saying "that the brand’s exclusivity, history and obsessive luxury help to convince customers that a Bentley is worth the price" which is at least twice that of a flagship luxury car from BMW or Mercedes-Benz. Although Rolls-Royce and Bentley have traditionally been considered "as a purveyor of boxy British land yachts", newer offerings such as the Bentley Continental Flying Spur and Bentley Continental GT have "upended the super-premium auto segment, making Bentley for the first time a plausible choice for younger Hollywood and music stars".
Maserati vehicles such as the Maserati Quattroporte have traditionally been priced as ultra-luxury cars, although the new Maserati Ghibli III is intended to compete with high-spec executive cars, such as the Audi S6/S7, BMW 550i and Mercedes-Benz E550/CLS550.
The most expensive variants of flagship cars from Audi, BMW, and Mercedes-Benz are often included here as well. They often feature a longer wheelbase and have V12 engines for great refinement and smoothness, even though contemporary V8 engines can make similar output while being less expensive. While BMW sells far fewer V12-engined 7-Series vehicles than V8 versions, the V12 retains popularity in the US, Brazil, China, and Russia, as well as maintaining the marque's prestige in the luxury vehicle market segment. These trims also feature standard luxury and technology features that would be considered optional on their V8 siblings.
There are ultra-high performance cars from "exotic brands" that also exceed US$100,000, but would not necessarily be categorized as luxury automobiles, such as the sports cars from Ferrari, Lamborghini, and Porsche, although the Porsche Panamera does compete in the high-end luxury/full-size luxury category.
Although only becoming popular in the 1990s, this category has been said to be created with Kaiser Jeep's 1966 Super Wagoneer as the first true luxury four-wheel drive (4x4) vehicle. It was the first serious off-road SUV to offer a V8 engine, automatic transmission, and luxury car trim and equipment. The Super Wagoneer was "a pioneer that blazed a trail for today's luxury SUVs". It came with long list of standard equipment that included bucket seating with center console, air conditioning, seven-position tilt steering wheel, a vinyl roof, as well as "Antique Gold" trim panels on the body sides and tailgate. After American Motors Corporation (AMC) purchased Jeep, the vehicles were upgraded and refined, including features such as an optional electric sliding steel sun roof, "possibly the first offered on an SUV". The late-1970s Jeep Wagoneer Limited "set the sport-utility market on its ear ... was the most luxurious four-wheeler anyone had ever seen."
The venerable Grand Wagoneer was still the leader in the luxury SUV market in 1986, and continued to be produced virtually unchanged through 1991, long after Chrysler bought out American Motors Corporation (AMC) in 1987. The SUV market soon expanded with new entrants. By the mid-1990s, the U.S. Big Three automakers, "especially with Ford's Explorer and Jeep's Grand Cherokee, dominate[d] the market for the red-hot sport/utilities." The fastest growing sector of this market was for the so-called luxury SUVs, which included the Jeep Grand Cherokee ... the Grand Cherokee's allure: "This vehicle is proof you can have a true off-road vehicle without giving up luxuries and amenities" with the Jeep providing a crucial new intangible factor for buyers — image.
The SUV models generated higher-profit-margins than ordinary automobiles, and automakers introduced new luxury models during the late 1990s, starting with Lincoln Navigator in 1997, besides traditional models like Range Rover. For some manufacturers such as Porsche and BMW, luxury SUVs were the first SUV models they produced. Luxury SUVs catered particularly to the U.S. market where station wagons were unpopular, often being produced in North America (such as BMW Spartanburg) instead of the luxury marque's home country. Some of these models were not traditional SUVs based on light trucks, rather they are classified as crossovers using unibody constructions. SUVs from non-luxury brands had experienced a surge in popularity through early 2000s, causing the traditional luxury marques to follow.[not in citation given]
SUVs from the luxury marques grew at almost 40 percent to more than 430,000 vehicles, excluding SUV-only brands like Hummer and Land Rover, while luxury car sales in the U.S. during 2003 suffered a 1% decline, and non-luxury SUV sales were flat. By 2004, 30 percent of major luxury brands' U.S. sales are now SUVs. Luxury brands in particular led the development of crossover SUVs (as opposed to body-on-frame SUVs), making it one of the fastest growing segments in the market, as the forecast for 2002 was approximately 240,000 vehicles and that could double by 2006. Research data showed luxury SUV buyers are compared those vehicles to SUVs of mass market brands, and not shopping around luxury cars, thus the SUV is becoming the key to bringing new customers to the luxury dealerships.
Certain luxury SUVs use body-on-frame underpinnings, often being badge-engineered versions of their non-luxury counterparts, and retaining the rugged off-road and towing capabilities. Examples include the Lexus LX and Lincoln Navigator, which are the premium versions of the Toyota Land Cruiser (which is considered as a luxury SUV itself) and Ford Expedition, respectively.
Other luxury SUVs are crossovers using unibody construction, often sharing the platform with compact executive and executive cars. For example, the Infiniti FX is based upon the Nissan FM platform that also underpins other Infiniti cars. Audi and BMW developed crossovers to compete in the SUV segment as they did not have an existing body-on-frame vehicle in their lineup. The Lexus RX was the earliest luxury crossover on the market, and it has since been the best-selling luxury vehicle in the US, so it has inspired similar competitors from rival marques. While early luxury crossovers released in the late 1990s have resembled traditional boxy SUVs, recent offerings have prioritized sportiness over utility — such as the Infiniti FX and BMW X6.
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Luxury cars tend to offer a higher degree of comfort than their mainstream counterparts, common amenities include genuine leather upholstery and polished wood or "woodgrain-look" dashboards. Compared to mainstream vehicles, luxury cars have traditionally emphasized comfort and safety. Luxury vehicles are also a status symbol for conspicuous consumption.
Contemporary luxury cars also offer higher performance and better handling, which is often known as sport luxury. However, in Europe, where large-displacement engines are often heavily taxed and many luxury buyers shy away from conspicuous consumption, brands offer buyers the option of removing exterior engine-identifying badges.
Forbes noted that the reputation of luxury marques enables them to continually introduce many new safety technologies and comfort amenities, such as anti-lock brakes, electronic stability control and DVD entertainment systems, long before they trickle down to mass market cars. Numerous "smart car" features were found on luxury cars as early as 2009.
The rear-wheel drive with longitudinal engines (FR) is a common layout of luxury cars. European marques like Mercedes-Benz, BMW, and Jaguar have almost never adopted front-wheel drive and retained a lineup mostly or entirely made up of FR cars. Japanese brands such as Lexus and Infiniti also have predominantly FR lineups. The FR layout, while more expensive than the FF, has been retained by these luxury manufacturers as it allows for higher performance engines (particularly the straight-6, V8, and other engine configurations with more cylinders), better handling, and a smoother ride. 
American manufacturers also largely followed the FR for their luxury brands (as well as their mass-market cars of the time). However, due to the Arab Oil Embargo of 1973 and the 1979 fuel crises, began eliminating their FR platforms in favor of the more economical front wheel drive transverse engine layout (FF). Chrysler went 100% FF by 1990 and GM's Cadillac and Buick brands for the US were entirely FF by 1997. One of the few notable holdouts was Ford's Lincoln Town Car and Lincoln LS.
In the 21st century, as part of the revamp of its design and image, Cadillac returned most of its lineup (sedans, roadsters, crossovers and SUVs) to rear- or all-wheel-drive, the only exceptions being the front-wheel drive Cadillac BLS (since discontinued; never sold in North America); Cadillac DTS (also discontinued); the Cadillac XTS (which replaced the DTS); and Cadillac ELR (a plug-in hybrid). Chrysler returned its full-size cars to this layout with the Chrysler 300 using shared technologies during the DaimlerChrysler era (Chrysler and Daimler-Benz (the parent company of Mercedes-Benz) co-developed the LX platform currently retained by Fiat Chrysler Automobiles. Ford's Lincoln division retained the longtime FR platform for the Town Car (phased out in 2011 with no direct replacement), intended for use as a limousine and chauffeured car. However, newer offerings such as the MKZ and MKS use newer FF platforms shared with mainstream Ford vehicles, the Ford Fusion and Ford Taurus, respectively, with all-wheel drive as an option.
A wide array of European producers made luxury cars, including Rolls-Royce Limited, Bugatti, Delage, Delahaye, and Talbot-Lago made vehicles that are still collectible today. Similarly, the Americans built the Duesenberg, Packard, and Cord luxury models.
Germany slowly became an export powerhouse during this period, building on success with the Mercedes-Benz brand, later joined by BMW, which now owns Rolls-Royce Motor Cars, and Volkswagen, which now owns Audi, Bentley, and Lamborghini.
In the United States luxury market, Cadillac and Lincoln Motor Company had long been the best-selling and second best-selling luxury brands until 1998, when they were overtaken by Japanese and German brands. These cars were not relevant in most export markets; they were tailored to the U.S. market - moderate price point luxury vehicles not constrained by gasoline pricing.
Before World War II, France was a leading producer of powerful luxury automobiles. After World War II, the French government used puissance fiscale tax regulations to encourage manufacturers to build cars with small engines, and French motorists to buy them. Since many export markets do not have this same constraint, the French automobile industry has become less relevant as an export power and currently produces no luxury brands.
Since the 1980s, a host of new manufacturers have entered the luxury market to challenge the traditional players. The three major Japanese auto manufacturers, Honda, Toyota, and Nissan, created their respective luxury brands particularly for the US. As a result of voluntary export restraints imposed in 1981, these manufacturers were limited to a number of vehicles they could export. While these companies sidestepped this by establishing US production facilities for mass market vehicles, their home factories soon begun producing higher-priced cars as they carried a greater profit margin per car. Acura was launched in 1986, while Lexus and Infiniti were unveiled in 1989. By 1992, these three divisions had sales of over US$3.5 billion, using lower prices and innovation to take market share from both domestic (Cadillac, Lincoln) and the European (Mercedes-Benz, Volvo, BMW, Audi and Jaguar) luxury car makers.
Since the 2000s, with the Cadillac CTS, the marque has seen a resurgence in sales and brand value. Ford's Lincoln, which had seen sales fall as a result of an aging lineup, has attempted to return that luxury marque to competitiveness, by releasing new models such as the Lincoln MKS, as well as divesting itself of its other Premier Automotive Group brands.
The Late-2000s recession was the first time since the Great Depression of the 1930s that the luxury car market suffered considerably, something not seen in previous economic downturns. Many such customers saw their net worth decline following the collapse in financial markets and real-estate values. For example, some of the steepest dropoffs came at the high end, including the BMW 7 Series and Rolls-Royce Phantom, and Mercedes-Benz unexpectedly dropped the starting price of its all-new 2010 E-Class. The unusually sharp decline in luxury car sales have led observers to believe that there is a fundamental shift and reshaping of the luxury automotive market, with one industry official suggesting that the marques no longer command the premiums that they used to, and another saying that conspicuous consumption was no longer attractive in poor economic conditions.  Additionally, mainstream brands have been able to offer amenities and devices such as leather, wood, and anti-lock brakes, previously found only on luxury cars, as the costs decline.
However, luxury vehicle sales have not collapsed as much as their non-luxury counterparts. Luxury vehicle marques generally benefited from financially healthier dealerships, better leasing and certified pre-owned programs and loyal customers, so sales are expected to rebound more quickly than mass market cars. Others note that there is growing interest in luxury vehicles from emerging markets such as China and Russia.
The entry-level luxury segment has been very competitive, and there has been price-overlapping with well-equipped non-luxury cars. For example, in Canada, several luxury manufacturers set sales records in August 2009, due mostly to aggressive incentives on entry-level luxury vehicles. In September 2009, BMW, Mercedes-Benz, Lexus and Audi all saw their Canadian sales increase by more than 10 per cent compared to a year earlier, despite overall Canadian auto sales being down 3.5 per cent compared to September 2008. The head of Mercedes-Benz Canada suggested that the brand "has been able to attract 'middle-class' consumers even during the recession because of the sense that owning a Mercedes-Benz comes with 'membership in a club'." BMW Canada's chief said luxury cars continued to be attractive, "I think due to new product offensives and due to new design and due to the fact that we are the benchmark in all areas when it comes to fuel efficiency... that together stimulates a lot of the market". BMW has managed to remain profitable in 2009 while other competitors were posting losses, by scaling down production quickly to avoid cash burn through bloated inventories.