Car Buying

Why Are European Cars Usually More Expensive Than American Cars?

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author photo by Doug DeMuro December 2015

If you're interested in buying a new or used car, you might be thinking about buying a European model from a luxury brand such as BMW, Mercedes or Audi. But you've probably realized that most of these models are a lot more expensive than their rivals from American or Asian brands. So why exactly are European vehicles so expensive? It's a good question -- with a complicated answer.

Exchange Rates and Labor Costs

Believe it or not, European cars aren't only expensive because they're luxurious. There are a few other reasons involved -- two of which are exchange rates and labor costs.

Exchange rates are important because fluctuating currency can tighten (or increase) profits for foreign automakers. Unfortunately, car companies can't exactly adjust pricing to correspond with these increases or declines in currency value. The result is that European vehicles are often priced higher than domestic ones, particularly if they're built in Europe, to account for potential currency fluctuations that may occur during a model's life cycle.

Another factor to consider: While some European cars are built in North America, the majority are still produced in Europe. Labor costs in Europe aren't cheap -- especially in developed countries such as the United Kingdom and Germany, where many vehicles are built. These costs are built in to the price of vehicles, which helps keep prices high.

Quality and Engineering

Another reason European cars tend to be pricier than even close rivals from American or Asian brands relates to the quality of materials -- and engineering -- that European automakers tend to use. That solid feeling you get when you drive many European cars largely comes from exhaustive engineering and pricy suspension components. And the excellent materials you'll find on virtually every surface of a European luxury car's interior aren't free, either: Their costs are passed along to the consumer, like other increased costs over rivals.

By comparison, Asian and American luxury cars tend to focus on the value aspect of the luxury-car world since it's so difficult to rival European luxury cars at their high price points. The result is that the cost of engineering, materials and components tends to be a little cheaper on most Asian and American luxury vehicles, which results in both lower prices and differences in quality.

Just Because

Another reason European vehicles are so much more expensive than non-European rivals? Brand name. Let's face it: The Mercedes-Benz brand name is more valuable than, for instance, the Infiniti name -- and that means shoppers are usually willing to pay more for a Mercedes than an Infiniti. The same goes for brands such as BMW, Audi, Jaguar and Land Rover compared to rivals including Lexus, Acura, Cadillac and Lincoln.

The result? Since European automakers have built up a strong reputation, they charge a premium for it -- and many shoppers interested in a luxury car are willing to pay that premium in order to drive what they consider to be the best.

Our Take

For many drivers, the only luxury cars worth considering are made in Europe. For many others, spending more on a European luxury vehicle is a laughable idea when Asian and American models offer so many benefits. If you're having trouble deciding between the two, consider driving an assortment of luxury vehicles before you make a purchase. If you feel like you're willing to pay a premium for a European luxury model, do it. If not, there are many non-European luxury brands worthy of consideration.

This image is a stock photo and is not an exact representation of any vehicle offered for sale. Advertised vehicles of this model may have styling, trim levels, colors and optional equipment that differ from the stock photo.
Why Are European Cars Usually More Expensive Than American Cars? - Autotrader