Leitz made excellent cameras, and they were always somewhat of a "luxury" item. Not too outrageous, but maybe something like a BMW or Mercedes might be today. They were this ubiquitous force in cameras for a long time – about 30 years – and their name became legendary and synonymous with the high-end 35mm camera.
Then came Nikons, and they took over quickly because they were the first camera system in a long time that was significantly better than or equal to Leicas in almost every way that counted to working photographers. All that was left for Leica was the legendary status, and, less so, the fact that, although outmatched in almost every way, they were still well-made cameras. When your product is not even close to being able to take on the competition (i.e. Nikon in this case), you can no longer rely on the product itself to keep you in business.
The Leica mystique was always perpetuated to some degree by the company, and when the cameras gradually phased out in the wake of Nikons, I think Leitz came to rely on their legendary status to keep themselves in business. The sentimentality of those who had grown up with and made their livings on the legendary Leicas of yore was stoked by the company and passed down from generation to generation.
Now we have exorbitantly priced cameras that are no better than what the company made when Nikon first blew them out of the water. Think about it. How the heck else is a company supposed to stay in business with a product that was handily outmatched fifty years ago? You don't sell the product. You sell something more than the product. The product simply becomes a vehicle for the purchase of status. With the cameras appealing to a much smaller market, prices had to go up both to support the myth, and to simply make enough money for the company to stay afloat. Make no mistake. Leicas are primarily luxury/leisure items, and have been for decades.
The way I see it, the trick to getting around this overpriced idiocy, and to simply get your hands on an excellent rangefinder camera, is to realize that the company has made no significant upgrades for 90% of truly serious shooters since the M2. If you want a quality rangefinder that simply gets the job done in an old-fashioned manner, don't buy anything past the M2, and do not fall for any of the collector garbage. Realize that no matter how good everyone proclaims the optics and mechanics of the cameras to be, they are over all an outdated and inferior tool to SLRs. The slight advantages in optics are more than outweighed by disadvantages in other areas. Leicas are worth owning and shooting because they are a well made example of a convenient, fun, and loose, seat of the pants style of camera of the past. You shoot one for the same reason you drive a '61 Cadillac: because they're fuggin' cool, and fuggin' fun, not because they are the best in the world in a technical sense (though they may have been at the time they were made).
That attitude would keep anyone in their right mind from paying thousands upon thousands of dollars for one. But no. Everyone is so convinced that having a Leica makes them a serious photographer. Everyone is convinced that they are vastly superior in quality to any other camera. Balls to that. The proof in pictures says otherwise. People shoot the same crap with Leicas that they do with any camera, and often it is even crappier because rangefinders are such a pain in the ass to use compared to SLRs. Leicas are cool because they are fun and old fashioned. Embrace that, and don't take them so damned seriously. You'll get out cheap, and have a million times more fun and get a million times better pictures than all the bozos paying big bucks for them so that they can think of themselves as serious photographers. Get an old thread mount camera or an early M and you've got everything that was ever good about using a Leica in the first place. You usually escape for well under a thousand bucks too.
The Leica mystique is due to the fact that people do not know how to objectively judge something, take it for what it is, and just enjoy it for the hell of it. They've always got to attach some sort of twisted value to it beyond what it actually is: a fuggin' bitchin' old camera that used to rule the world.