NEW YORK (TheStreet) -- With the dollar trading at its highest level against the euro since 2003, wealthy Americans can snag big bargains on pricey European supercars. But those savings might not ultimately mean that much to the well-heeled purchasers of such extravagances.
European luxury cars such as Lamborghinis and Maseratis "are on sale for Americans," says Ferdinand Dudenhöffer, head of the Center for Automotive Research at the University of Duisburg-Essen in Germany. The favorable exchange rate -- one euro is worth $1.08 currently, down from $1.37 in July 2014 -- has helped lower prices by 20% compared to nine months ago for Americans buying cars in Europe. While shipping costs, tariffs and insurance can bring the savings down a bit, Dudenhöffer says the lower exchange rate still allows those paying with dollars to get a deal.
The exchange rate can work to Americans' favor even if they don't go abroad. The drop in the euro gives U.S. dealers of European cars more flexibility to discount since sales in higher value dollars will eventually be booked in euros. Savvy negotiating with a dealer in the U.S. can yield as much as a 10% discount off the sticker price, says Dudenhöffer.
Cherry on Top
Of course, at this price point for a luxury purchase like the McLaren 570S -- unveiled this week at the New York Auto Show, with an estimated starting price of $185,000 -- high net-worth consumers are not driven by discounts resulting from exchange rates.
“The car may be on sale for Americans [in light of the weakened euro and strengthened dollar], but it would have very little effect on demand,” said Steven R. Elliott, analyst for North American forecasts at LMC Automotive. “The price elasticity of demand on these types of vehicles is very low.”
In other words, the sort of affluent consumer in this segment is not all that sensitive to price. “Since vehicles of this nature are not really purchased out of practicality, a buyer will make their decision based on personal preferences related to the design of the vehicle,” Elliott said. The unexpected discount just sort of sweetens the pot.
Take, for example, Andrew Magsino, 29, who does car product placement in music videos for the likes of Rick Ross and 50 Cent, and is interested in purchasing a Lamborghini. Wednesday evening, the New York City resident attended a VIP event at Cedar Lake Dance Company in Manhattan for Lambo owners and prospective customers.
“To tell you the truth, that’s just an extra set of wheels for me,” he said, as he eyed the newly revealed matte-white Aventador. “Everything is kind of driven based on emotion – what it looks like and how fast it goes. I’m a speed fanatic. As long as the car flies, that’s what I’m after.”
He currently drives a Mercedes-Benz SLS AMG, a car that goes for over $200,000, but he used to own a Lamborghini Murciélago and wants to get back to Lambo as an enthusiast.
Magsino said the potential currency arbitrage is not going to give him incentives to make or not make a purchase. The same goes for his friend Q Park, 36, who makes a living as a viral video star on Vine -- not for a car that costs close to $400,000, Park said. Yet, who could say no to a baked-in discount based on currency dynamics?
“It would be a plus, of course,” Magsino said of a potential 10% break. “It’s a cherry on top. It’s always nice to have extra money for no reason, you know? That’s like a watch or whatever.”
Indeed, a deal is hard to pass up, and if the euro-dollar ratio stays constant or improves in the dollar’s favor -- Deutsch Bank has pegged the euro’s bottom at $0.85 -- buyers could flock to Europe in search of bargains.
“The weaker euro brings about a wealth of interest in these goods from abroad,” said Edmunds.com analyst Jeremy Acevedo. “Purchases of European luxury goods -- exotic cars included -- will benefit from increased patronage from Chinese, American, and other shoppers from abroad. I'd say the fact that it's been so long since the euro has had this valuation, means that we can expect a sharp influx of incremental sales as well as increased spending on these vehicles by the international audience.”
A Conflicting Opinion
Before high net-worth individuals across the U.S. start licking their chops to buy a new Ferrari F-12 Berlinetta on sale, not everyone agrees that U.S. luxury car buyers will end up being able to negotiate much of an added discount because of the strong dollar, if it all.
Antonio Rodriguez-Lopez, assistant professor of economics at the University of California, Irvine and author of the article Prices and Exchange Rates: A Theory of Disconnect, thinks pricing will hold course for exotic cars -- whether the Rolls-Royce Wraith or the Aston Martin Vantage.
“As long as the demand for these luxury cars remains strong in the U.S., I should not expect many changes in their U.S. prices,” he said, arguing that car makers will merely take the strong dollar as an opportunity to increase their margins given that they will get more euros for each car they sell stateside.
Rodriguez-Lopez said the only way for prices on exotics to drop would be if the dollar strengthened so much that it generated a large enough difference that Americans would be better off buying the car in, say, Italy and paying shipping costs to get it back to the U.S.
“Even in this scenario, the U.S. price would only go down the sufficient amount to erode the arbitrage opportunity,” he said.
Of course, whether consumers do in fact experience discounts, as some expect, it’s not a consideration weighing heavily on them. If it is, they may need to rethink their mindset, said Magsino, the enthusiast toying with the prospect of a Lambo purchase.
“If you need to save $20,000 to buy a car, you probably shouldn’t be buying this kind of car,” Magsino said.
Check Out the Slideshow to Compare
But, if you're sucker for a bargain and want to see how much of a deal you'd get on certain luxury sports cars and exotic vehicles, click onward. We break down the MSRPs for four vehicles as they are priced in London, Paris and New York to determine how currency fluctuations have benefited the American buyers over the last nine months. We've also included calculations under the New York sub-headings to account for Dudenhöffer's theory that buyers can nab a 10% discount at American dealerships.
Take into account the fact that it typically costs some $2,000 to ship a car to the U.S. from Europe plus shipping insurance (about 1.5% to 2% of the estimated value of the car), port of entry taxes (about $200), and the cost for the company to transport the vehicle to the port for shipping (a couple hundred dollars).
July 2014: £230,000 ($391,000)
April 2015: £ 230,000 ($345,000)
July 2014: € 240,000 ($328,000)
April 2015: € 240,000 ($259,200)
July 2014: $284,900
April 2015 (negotiated down 10%): $256,410
Aston-Martin V8 Vantage
July 2014: £102,500 ($174,250)
April 2015: £ 102,500 ($153,750)
July 2014: € 96,635 ($132,389.95)
April 2015: € 96,635 ($104,365.80)
July 2014: $123,695
April 2015 (negotiated down 10%): $111,325.50
July 2014: £260,040 ($442,068)
April 2015: £260,040 ($390,060)
July 2014: €326,700 ($450,846)
April 2015: € 326,700 ($352,836)
July 2014: $397,500
April 2015 (negotiated down 10%): $357,750
--Written by Ross Kenneth Urken for TheStreet