A new sales policy implemented by Japanese automaker Nissan (NSANY) aimed at moving cars off dealer lots isn't sitting well with its dealers, but it might give buyers an opportunity to score a deal on a new car.
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Nissan sent out a memo to dealers stating that dealers can advertise cars for up to 10% off the invoice price (the price dealers paid their respective automaker for an individual vehicle), a massive price deduction that can undercut vehicle MSRPs, according to a new report by Automotive News,.
An exception is given to the automaker's Armada — a large SUV that is positioned in size and price to popular competitors like the Chevrolet Tahoe, Ford Expedition and Toyota Sequoia. Nissan is allowing its dealers to sell the large SUV for up to 15% off the invoice price — a large discount off its $56,520 MSRP.
Currently, Nissan vehicles spend an average of 98 days on dealer lots, and with consumers worried about the high price of entry for new cars, the automaker is putting a large wager on whether unusually low prices will bring customers in the door.
Nissan
Some Nissan dealers are welcoming the idea, however, like most shrewd businesspeople, they aren't willing to pay for it. Some Nissan dealers told AutoNews that the automaker should push incentives and increase Tier 1 marketing spending to get cars off the lot, instead of putting the burden on their checkbooks and sanity.
"Nissan is saying, ‘We can’t afford to be in the market, so you need to be,’" one Nissan retailer told AutoNews. “The responsibility has been moved from the factory to us.”
However, some are taking it with a more positive note. A Nissan dealer in a major metropolitan area told AutoNews that they are welcoming the change because they have over 200 unsold new vehicles sitting on their lot.
"We want more flexibility to make better deals and get more traffic into the stores," they said. "If I can get my floorplan expense down by moving some of these cars, I'll do it."
Some dealers said that they are way ahead of Nissan's plan and are already selling at below invoice, noting that it keeps a cycle going at their business.
"In the past six months, we realized there's not a bad deal on a Nissan," one dealer said. "If somebody wants to buy a car, you throw caution to the wind and just make a deal. If we can trade an off-lease car, it's less money that I have to pay at auction and it keeps my service department going."
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Though the extreme price cutting may seem like an effective short term solution, some retailers are concerned about Nissan's willingness to resort to extreme measures may hurt both dealers and the brand in the long run. Previously, Nissan relied on controversial sales practices, such as fleet and rental car sales to help boost its bottom line.
"Strong brands don't want dealers in a race to the bottom," one retailer said. "Louis Vuitton doesn't want some guy selling their $5,000 purse for $3,000."
Though the memo acts as a theoretical "permission slip" allowing dealers to sell below invoice, the dealers themselves are not required to slash their prices. Some dealers say that they will use the opportunity to move some slow-moving cars, as well as lower-trim cars with a short list of features.
One enterprising dealer argued that this new policy will allow them to upsell some buyers attracted to low advertised prices on base models that may lack some basic luxuries.
"When the consumer gets here and realizes the vehicle doesn't have the feature, they are willing to pay the extra $3000 to upgrade the power seats," they said. "You go to Best Buy to buy the $499 TV and go home with a TV for $1,099."
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