In March Nissan made the sketchy decision to offer subprime loans for those unable to qualify for Nissan Motor Acceptance credit. Now it has taken an even darker path to potentially screw buyers. Now it will pay bonuses to dealers able to convince customers to make longer-term loans. Like 84-96-month loans. Is this what Nissan means when it says the customer is first?
How are 84-month finance loans hurting Nissan customers?
Car Direct first reported that dealers will get up to an additional $450 from Mother Nissan for every 84-month finance loan. It amounts to Nissan Motor Acceptance Corporation paying one percent of the amount financed to the dealer. There are a number of problems with this scenario but the main one is low-income and minority buyers.
This targets them because they are the ones that usually need the smaller monthly loan amount. But it also means that at some point they’ll be upside down on the loan. Should they become unable to pay those monthly payments they’ll owe more than what the vehicle is worth. Unfortunately, there is an ugly precedent for discrimination when it comes to minority buyers.
The National Fair Housing Alliance conducted a test back in 2018. It used two couples; one black and one white, to hit up car dealers for a loan. In 63% of the cases, the black couple received a higher interest rate than the white couple. And the couples’ backgrounds were rigged by the NFHA to show the black couple as more qualified.
Longer loans are dangerous on higher depreciation vehicles like Nissan
That means that in many cases those facing higher monthly payments due to a higher percentage rate will go with the longer loan. That way their monthly payment is smaller. And a longer loan is especially dangerous for models and brands that see higher depreciation. Like Nissan Altimas, for instance.
According to Consumer Reports, Altimas typically depreciate 59% in the first five years. So if the owner decides he or she needs a new car there is negative equity to deal with. In most cases, it just gets rolled into the purchase price of the new car. So the buyer now owes more than the car is worth right out of the gate. It is not good.
In many cases that $40,000 vehicle can ramp up to be over $55,000 with interest. So you’re already paying more for that credit. It can become a vicious cycle unless the buyer’s fortunes change. It puts more people at risk financially and can have a domino effect of costing first their transportation and then their job.