Nissan Is Going To Pay Dealers More To Steer Customers Toward 84 Month Loans

Image for article titled Nissan Is Going To Pay Dealers More To Steer Customers Toward 84 Month Loans
Image: Paul J. Richards (Getty Images)

First, Nissan doubles down on subprime lending. Now it’s willing to pay dealers more money when customers take out longer terms. This is the new plan Nissan has laid out for dealers, according to a report from Cars Direct.

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Nissan is calling this the future of NMAC dealer compensation, referring to its finance arm, Nissan Motor Acceptance Corporation. In the plan, when customers finance their loans through NMAC Nissan will pay dealers 1 percent of the total amount financed.

But it gets better.

Cars Direct says that in the fine print you’ll learn dealers will get as much as $450 when customers go with 84-month financing. Nissan seems to be willing to steer people into financially precarious loans for the benefit of dealers’ profits. It’s not putting the customer first.

Image for article titled Nissan Is Going To Pay Dealers More To Steer Customers Toward 84 Month Loans
Image: Nissan

This all has the potential to be bad on many fronts. The main problem is that it disproportionally affects — or outright targets — low-income individuals and minorities.

How? Some dealers may discriminate. Judging people is a thing when it comes to car sales, as demonstrated in a 2018 test conducted by the National Fair Housing Alliance using two couples at dealers in Virginia, one Black and one white. Their findings showed that 63 percent of the time, the Black customers received higher interest rates on their loans, even though they were more qualified than their white counterparts. The potential effect is that buyers with higher interest rates would choose longer terms to lower their monthly payments.

Image for article titled Nissan Is Going To Pay Dealers More To Steer Customers Toward 84 Month Loans
Screenshot: NMAC
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This all also ties into another problem. Dealers will be inclined to offer customers longer terms to earn higher compensation for the dealership. Dangling the lower payments that come with 84 and 96-month loan terms could get customers into trouble as the loans go underwater — owing more than the car’s value — especially with brands and models that have steep depreciation curves.

Nissan is one of those brands. An Altima for instance, with an assumed selling price of $26,453 will depreciate 59 percent after just five years. That much depreciation in five years of a seven-year loan with a high interest rate? It doesn’t bode well for anyone. The sad part is, I’m sure Nissan dealers would be more than OK to welcome these customers back, rolling that negative equity into another loan to again line their pockets.

DISCUSSION

By
ThisGuy

Just bought a car yesterday and the finance person made some huge assumptions before meeting with us. She had the paperwork drawn up with zero down and 72 and 84 month options with helpful breakdowns of monthly payments including all of the extended warranty and add ons they offer.
I told her we were doing 10k down and wanted to see what 36-48 mo. rates were, also no add ons. I’m assuming I won’t be her favorite customer this month.
If we would have went with everything she was selling, the $42,000 car would have cost us $54,500 over 7 years.