What is a luxury car these days? The thought was prompted by an hour driving the new Rolls-Royce Phantom, the £250,000 job launched by Rolls' new owners, BMW, this summer. It is extraordinary in that it is about one-and-a-half times the size of a normal car but more that it is utterly silent, utterly smooth yet finger-light to drive. But while it would be great to go up to Scotland in, it is also a bit embarrassing. To shout that sort of money when a car costing, say, £70,000 would do the job almost as well seems tacky.

It also raises the question as to the nature of luxury. Go back a generation and luxury meant air-conditioning, electric windows, top quality sound system, and of course all the technical qualities of a big engine, silence and ride quality. But now all expensive cars offer these. You can add yet more technology but who really wants this? What is the point of a car that will get you to 60mph in six seconds instead of eight?

But Bentley, now owned by Volkswagen, launch the Continental, a four-seat coupé, in a couple of months. It will be followed by a four-door version on a slightly longer wheel-base, which will revive the 1950s name Flying Spur. And Mercedes is reviving the name of Maybach, the 1930s luxury brand, not apparently with great success. There is a new Cadillac and a string of performance cars, including an even hotter Porsche 911.

Why should the manufacturers launch luxury cars when much of the world is in recession or near to it? One answer is that these were planned in the late 1990s but took five years to come to fruition. But there must be others. I popped into the Mayfair showrooms of Jack Barclay, the world's largest distributor of Rolls-Royce and Bentley cars.

The story, it seems, goes like this. The market is picking up partly because of low interest rates. Forty per cent of sales are on credit. Foreign buyers are returning as emerging markets are recovering most quickly from the downturn. And since paying this sort of money for a car is essentially people giving themselves a reward, those who have come through the downturn want to give themselves a pat on the back.

Rolls and Bentley are creating new markets for themselves. Half the buyers of the Phantom have never owned a Rolls-Royce. It is so hugely more expensive than any other car that if you want to shout money it is as good a way as any. Bentley's new Continental is priced at £110,000 and is pulling former Aston Martin and Porsche owners, while its much-improved Arnage has been given a sheen of approval by such purchasers as David Beckham.

I was concerned that the long gestation period between a car being approved and it going into production meant that cars designed for the 1990s boom were hitting the market in the 2000s slump. Sales have certainly been slow during the past two years. But maybe sales of luxury cars are a lead indicator of the next growth phase.

Economies are about confidence and economists are always scouring the opinion surveys for signs of the trend of future growth. Maybe if the Phantom sells as well as its promoters hope, this will be a signal that the next upswing is secure. I'd like to think so.

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