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12 Surprisingly Affordable Luxury Cars – Best Rides Under $40,000

Is your ride due for an upgrade?

Frugal car buyers assume luxury cars have no place in their garages or driveways. In many cases, they’re right. Buying more car than you can afford is one of the easiest and most preventable ways to get into debt. More than that, it’s often futile: To get out of debt caused by an unwise car purchase, you very often have to sell the vehicle.

But luxury cars aren’t solely for the rich and famous. If you have ample personal savings, reliable income, and budgetary discipline, you may have the means to buy a luxury new or used car.

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Surprisingly Affordable Luxury Cars Under $40,000

A handful of base-model luxury new cars start at under $30,000. Pre-owned luxury cars (typically coming off three-year leases) can cost as little as $15,000, though their long-term maintenance costs are likely to be higher than their brand-new counterparts.

Note that after taxes and fees, your final price may be higher, though you can and should try to negotiate a better selling price at the dealership and can save big if you opt for a gently used car.

But which luxury cars can you expect to get for a manufacturer’s suggested retail price (MSRP) under $40,000? A wider variety than you might expect.

These affordable luxury vehicles include compact configurations (like coupes) and roomier ones (like station wagons and crossover SUVs). Some are quite fuel-efficient, though the Environmental Protection Agency miles-per-gallon (EPA MPG) rating varies widely. And most have above-average ratings from the Insurance Institute for Highway Safety (IIHS), an independent arbiter of vehicle safety.

1. Cadillac CT4

  • Class: Midsize sedan, coupe
  • EPA MPG: 23 city, 34 highway
  • MSRP: $33,990
  • IIHS Crash Safety Rating: Good

The Cadillac CT4 is a sporty four-door sedan that’s undeniably fun to drive. The base model has a four-cylinder, 237-horsepower, 2.0-liter engine with automatic start-stop capabilities. Rear-wheel drive comes standard, but you can upgrade to all-wheel drive for a couple thousand more (the specific amount depends on options). But StabiliTrak technology improves braking and stability in challenging road conditions, even with rear-wheel drive.

Inside the cabin, Cadillac offers a comprehensive “infotainment” system featuring a handy touch screen, multi-speaker surround-sound system, wireless charging capabilities, voice recognition commands, Apple and Android operating system integrations, and a rearview camera. CT4 also has feature-rich OnStar service (about $15 to $45 per month after a 12-month trial subscription, depending on the plan) and a complimentary SiriusXM trial subscription.

2. Volvo S60

  • Class: Midsize sedan
  • EPA MPG: 23 city, 34 highway
  • MSRP: $38,950
  • IIHS Crash Safety Rating: Good

The Volvo S60 has long been a popular mainstay of the venerable Swedish automaker’s lineup. The base version is a relative bargain at less than $38,000.

And you don’t need the high-end trims, which can cost as much as $60,000, to feel like you’re driving a luxury car. The base S60 has 18-inch alloy wheels, leather seats, and swanky aluminum interior touches.

A five-cylinder, 2.0-liter engine delivers 250 horsepower at 258 pound-feet of torque — more than enough for a thrilling burst of speed whenever warranted. The optional all-wheel-drive package cuts fuel economy by a few miles per gallon and adds about $3,000 to MSRP, but it’s certainly welcome in cold climates.

Even the base version has customization options galore. For $1,700 more, the premium package features HomeLink (a smart home hub integration), folding backrests and head restraints, a rearview mirror compass, park-assist capabilities, and a Sensus infotainment system featuring GPS navigation and hands-free calling capabilities.

3. Mercedes-Benz CLA 250

  • Class: Compact sedan, coupe
  • EPA MPG: 25 city, 35 highway
  • MSRP: $37,850
  • IIHS Crash Safety Rating: Superior (front crash-prevention only)

For a Mercedes-Benz, the CLA 250 is surprisingly down-to-earth. It’s a sleek, stylish coupe-sedan mashup that delivers 208 horsepower from an efficient four-cylinder, 2.0-liter engine. With a 0-to-60 acceleration time just shy of seven seconds, it won’t win any awards on the racetrack, but it’s fun to drive around town.

Unlike old-school Mercedes coupes, the CLA comes standard with front-wheel drive and an independent suspension that provides a supple, adaptive ride. Performance car enthusiasts go gaga over the AMG body, an homage to Mercedes’s precision (and usually very expensive) AMG line.

CLA safety features include adaptive braking, a rearview camera, eight airbags, attention assist (a driver-alert system), active brake assist, rain-sensing windshield wipers, and blind-spot assist.

And the infotainment system is above-average too, with sophisticated voice control, HD radio, hands-free Bluetooth interface, Apple CarPlay and Android Auto, and multiple USB-C ports.

4. BMW 230i

  • Class: Coupe, convertible
  • EPA MPG: 25 city, 32 highway
  • MSRP: $35,900
  • IIHS Crash Safety Rating: Good

The 230i is BMW’s answer to the CLA 250. It’s a stunning little coupe that’s a bit smaller than the famous BMW 3 series and also available as a convertible.

The 230i boasts a four-cylinder, 2.0-liter engine that achieves 248 horsepower and 258 pound-feet of torque without sacrificing fuel efficiency. The ultra-smooth eight-speed automatic transmission includes a manual shift mode, though it’s worth noting that manual mode saps 3 MPG from the combined fuel economy rating.

The 230i’s selling points are fun and performance, but safety and technology features abound too. A standard dynamic stability-control feature includes a slew of safety enhancements, such as brake drying, traction control, and brake fade-assist.

A seven-speaker sound system and high-definition (HD) radio combine to deliver crystal-clear, lifelike audio, while the iDrive infotainment system boasts eight presets.

5. Jaguar XE

  • Class: Compact sedan
  • EPA MPG: 25 city, 34 highway
  • MSRP: $39,900
  • IIHS Crash Safety Rating: Not yet rated

The Jaguar XE is one of the more exciting (and reliable) models to come out of its maker’s workshop in some time. A 247-horsepower, four-cylinder, 2.0-liter engine delivers the optimal mix of efficiency, pep, and power. And the best-in-class warranty is worth noting upfront — proof the automaker has finally put long-running questions about vehicle longevity behind it.

Though Jaguar XE’s MSRP is higher than some of the other cars on this list, its fuel economy is a potential selling point for frugal drivers who plan to spend lots of time behind the wheel. (That’s true for Audi’s economical A4 and A3 models as well.) Assuming an average lifetime fuel economy of 28 MPG (the official EPA estimate for combined city-highway driving) and an average lifetime fuel price of $2.50 per gallon, you’d spend just under $7,000 on gas to drive 100,000 miles in this car.

6. Audi A4

  • Class: Compact sedan
  • EPA MPG: 25 city, 34 highway
  • MSRP: $39,100
  • IIHS Crash Safety Rating: Good

The Audi A4 is among the most recognizable, longest-running luxury car models on the American market. The latest version boasts a super-efficient yet powerful 2.0-liter engine that puts out 201 horsepower with just four cylinders.

Every A4 comes with standard Quattro four-wheel drive, an especially nice feature in cold, snowy climates. And the A4’s technology and safety features more than stand up to the competition: electronic stability control, anti-lock brakes, an electromechanical parking brake, a vehicle immobilizer, and a high-tech child-restraint system.

Inside, leather seats and three-zone climate control provide unparalleled comfort, while an HD radio and state-of-the-art stereo system support theater-quality sound.

7. Lexus UX 250h Hybrid

  • Class: Compact SUV, crossover (hybrid)
  • EPA MPG: 41 city, 38 highway
  • MSRP: $35,100
  • IIHS Crash Safety Rating: Good

The Lexus UX 250h hybrid is the only hybrid vehicle on this list. Not coincidentally, it has the best city and highway mileage by a fair margin, despite a surprisingly peppy 2.0-liter, four-cylinder engine that produces 181 horsepower.

Due to the excellent city fuel economy rating, the UX 250h is the best luxury car choice for eco-conscious buyers: at $2.50 per gallon and 39 median MPG, your first 100,000 miles will produce a fuel bill of $6,410. Combined with its relatively low price tag, that makes the UX 250h an outstanding choice for those concerned about long-term car ownership costs.

The UX 250h boasts an excellent navigation system and comes standard with a powerful infotainment system that lets you order roadside assistance, receive real-time maintenance alerts and recommendations, and plan your next road trip without lifting a finger.

A customizable cargo area offers the second-most storage space of any vehicle on this list. Only the BMW X1 has more.

And if you’re unwilling to sacrifice performance for fuel economy, you don’t have to. Upgrade to the F Sport trim, which costs less than $2,000 more than the base version and boasts a slew of driver-friendly features, including bolstered front seats, a leather-trimmed shift knob, and aluminum pedals.

8. Acura TLX

  • Class: Midsize sedan
  • EPA MPG: 22 city, 31 highway
  • MSRP: $37,500
  • IIHS Crash Safety Rating: Average (driver’s-side crash protection and headlights) to good (all other rated components)

Acura bills its TLX as a “performance luxury sedan.” That sounds about right.

The standard engine is a 272-horsepower, 2.0-liter, four-cylinder that provides all the power you need for a vehicle so light. Plus, Acura is taking the game directly to Volvo and Audi with a state-of-the-art all-wheel-drive option that stands toe to toe with comparable options from V60, A3, and A4.

If you’re into the whole driving experience thing, turn on sport mode and use the paddle shifters to change gears manually. They recreate the manual transmission experience without the inconvenience of a clutch.

TLX has plenty of customization options that can push the base price well above the $37,500 MSRP, such as the $4,000 technology package (featuring blind spot sensing, park assist, and cross-traffic monitoring).

The standard infotainment system is impressive, though, with HD radio, two USB ports, and flexible smartphone integration.

9. Acura ILX

  • Class: Compact sedan
  • EPA MPG: 24 city, 34 highway
  • MSRP: $25,950
  • IIHS Crash Safety Rating: Good

The Acura ILX is a little smaller than TLX, has fewer frills, and is less peppy. But the entry-level vehicle stands up to scrutiny. And with a starting price under $26,000, it’s one of the best new luxury car deals on the market today.

Acura makes a big deal of the ILX’s pedigree. It incorporates technology from the legendary NSX supercar, a perennial if low-profile favorite of serious automotive enthusiasts. The 2.4-liter, four-cylinder engine summons up 201 horsepower and averages approximately 30 MPG in combined city-highway driving.

An eight-speed dual-clutch transmission — the first of its kind, according to Acura — guarantees smooth, effortless gear changes. And a state-of-the-art noise-canceling system turns the entire cabin into a giant noise-canceling headphone, great for drivers who don’t want wind and engine noise to interfere with their musical preferences or hands-free phone conversations.

For a relatively basic luxury car, the ILX has some innovative safety and technology features. Key selling points include a lane-keeping assist system, adaptive cruise control, anticipatory braking (collision mitigation), and a blind-spot information system that provides real-time alerts on congested roadways.

10. Audi A3

  • Class: Compact sedan
  • EPA MPG: 27 city, 36 highway
  • MSRP: $33,300
  • IIHS Crash Safety Rating: Good

Formerly a sporty hatchback, the redesigned Audi A3 is a still-sporty compact sedan with lots of pep and plenty of high-tech bells and whistles. In short, it’s a slightly smaller, slightly sleeker version of the A4, complete with an efficient 2.0-liter, four-cylinder engine that supports a 184-horsepower powertrain.

Like its larger sibling, the A3 features a slew of driver safety features, including electronic stability control, an electromechanical parking brake, anti-lock brakes, and a child-restraint system. It doesn’t have a vehicle immobilizer, though the anti-theft alarm may well be all the protection you need against would-be thieves.

The xenon headlights, LED taillights, and a single-frame grille combine for an arresting profile, day or night.

Inside, the A3’s creature comforts and infotainment system resemble the A4’s down to the leather seating and HD radio. The rearview camera is a must in tight spaces, and the rain-sensing wipers are essential for cautious drivers.

11. BMW X1

  • Class: Compact SUV
  • EPA MPG: 24 city, 33 highway
  • MSRP: $35,400
  • IIHS Crash Safety Rating: Good

The BMW X1 is technically a compact SUV, but BMW brands it a “sports activity vehicle.” That’s because its abundance of cargo space, lively seating configurations, and sure handling make it intensely practical — but its car-like suspension is too delicate to do any serious off-roading. But that’s all most families need.

The X1 is one of the more fuel-efficient SUVs on the road today thanks to an ultra-economical 2.0-liter, four-cylinder engine that somehow manages to produce 228 horsepower. An eight-speed automatic transmission comes standard, but if responsiveness is a priority, you can switch to a manual shifting configuration that delivers plenty of thrills.

A novel heads-up display illuminates the driver’s side windshield with essential notifications and status updates, keeping your eyes where they belong at all times. Otherwise, use the 8.8-inch infotainment display for real-time navigation, voice commands, and SiriusXM radio.

The X1 offers four unique add-on packages, each of which adds significantly to the base model’s cost. If you plan off-road driving, consider the M Sport package, which includes a more rugged suspension and run-flat tires. The Cold Weather package is clutch in chilly regions, though it doesn’t have all-wheel drive — a potential deal breaker for safety-minded buyers.

12. Infiniti Q50

  • Class: Midsize sedan
  • EPA MPG: 20 city, 29 highway
  • MSRP: $36,600
  • IIHS Crash Safety Rating: Good

The substantially redesigned Infiniti Q50 is a sleek midsize sedan. Even the vanilla version is packed with features. Among them are a 300-horsepower, 3.0-liter, six-cylinder engine with a front-wheel drivetrain, 17-inch alloy wheels, dual-zone climate control, rain-sensing wipers, anti-lock brakes, rearview monitor (camera), and the InTuition infotainment system featuring Bluetooth functionality and SiriusXM radio.

But that’s just the start. One of Q50’s top selling points is the model’s impressive customization potential, with optional add-ons like intelligent all-wheel-drive for about $2,000 more. But beware: Higher-end trims with premium extras can dramatically increase the sticker price (pushing it well above $40,000) and sap fuel economy.

Final Word

That the inventory of sub-$40,000 luxury cars remains so broad doesn’t mean the average car buyer should choose luxury marques over comparably priced mass-market alternatives.

On the contrary, luxury cars that seem to compete well on cost can carry hidden expenses that aren’t entirely clear until later in the vehicle’s life. Foreign luxury makes like BMW and Mercedes may cost more to maintain and repair than mass-market domestic brands like Chevrolet and Ford. And peppier luxury cars inevitably produce higher fuel bills over time.

As such, there’s a compelling case for investing in an economy car popular with college students rather than a luxury coupe. Of course, student-friendly economy cars aren’t as fun to drive.

Your mileage may vary, as they say.

Brian Martucci writes about credit cards, banking, insurance, travel, and more. When he's not investigating time- and money-saving strategies for Money Crashers readers, you can find him exploring his favorite trails or sampling a new cuisine. Reach him on Twitter @Brian_Martucci.