Sales of the Nissan Rogue compact crossover surged 69% in the first half of the year.
Nissan Motor Co. has turned on the incentive spigot to strengthen its position in the compact crossover segment.
In January, the Japanese automaker began offering three-year, 0 percent financing on its bestselling Rogue.
It’s an attempt to pick up market share in a key segment, dealers and analysts said. And through the first half of the year, Rogue sales surged 69 percent to 147,745 vehicles.
Nissan dealer Eric Frehsee said the lucrative financing offer is “definitely not a sign that there are any issues with the Rogue.”
The crossover is “consistently our No. 1 seller,” said Frehsee, president of Tamaroff Group, which operates two Nissan stores in suburban Detroit. “Rogue represents over 50 percent of our sales.”
Frehsee described the financing offer as an “advertising play” to attract consumers.
“Interest rates are so high on the leases right now that you can’t really advertise the lease price and be super competitive,” he said. “They’re putting all their horsepower behind [the Rogue] to try to move as many as possible.”
Former Nissan National Dealer Advisory Board Chairman Scott Smith said 0 percent financing is attractive for payment buyers in a high-interest environment.
“It drives a lower payment,” said Smith, president of Smith Automotive Group, which operates four Nissan dealerships in suburban Atlanta. “It appeals to the consumer seeing 5 percent to 6 percent interest rates. So it appeals to a broader spectrum.”
Smith said Nissan’s focus on the Rogue makes sense.
“This is a core model and an area we need to focus customer retention on,” he said. “[The segment] is where we do best and is the place to compete.”
Nissan North America sales and marketing boss Michael Colleran said the financing offer on the Rogue is a win for customers.
“Consumer affordability is definitely getting stretched right now,” Colleran said. “People are just trying to figure out how to buy eggs and milk these days.”
Automakers prefer lowering interest payments over cutting sticker prices, which can ding residual values.
“It keeps the transaction price higher, and [dealers] get a retention tool,” Smith said.
Interest rate offers are an effective incentive, especially for Nissan’s price-sensitive customer base.
Ivan Drury, director of insights at Edmunds, said that 1 in 4 Rogue buyers in July “aren’t paying a dime in finance charges.”
Drury said that the Ford Escape and Hyundai Tucson, Rogue competitors, also have 0 percent offers, but with just an 18 percent take rate on the Escape and 6 percent on the Tucson.
A 36-month loan is a financing sweet spot because it matches the buying cycle with the vehicle warranty and drives customer loyalty.
“If a consumer comes out at 36 months, we know that they tend to be much more loyal” than at 72 months and 84 months, Colleran said. “Loyalty is very low when it comes to those longer terms, even if those terms are at lower rates.”
Shorter loan terms also create an earlier opportunity for repeat business.
“Oftentimes, you’ll see a consumer come into equity well before that 36 months,” Colleran said, allowing them to purchase again.
The compact crossover segment leads the industry in volume and is hypercompetitive, with 18 nameplates in the U.S.
Compact crossovers represent 1 in 5 vehicles sold, according to Edmunds.
Drury said inventory turnover time is at two weeks or less for some of the most desirable vehicles in the segment, showing tremendous demand despite ever-increasing new-car financing costs.
“There is not a single mainstream automaker that doesn’t aspire to do well in the segment where many new shoppers will land,” he said.
The Rogue, redesigned in 2020, is the third-fastest-growing nameplate in the segment behind the Mazda CX-50 and Buick Envision, according to the Automotive News Research & Data Center. It ranks third in volume behind the Toyota RAV4 and Honda CR-V.
The Rogue is “essential to Nissan’s survival,” Drury said, noting the nameplate represents 1 in every 3 Nissans sold.
The financing offer arrives as Nissan dials up Rogue manufacturing after supply chain issues kneecapped output last year.
AutoForecast Solutions estimated that Rogue production rose 59 percent in the first six months compared with a year earlier. But compared with the first half of 2021, Rogue output is “basically flat,” said Sam Fiorani, AutoForecast Solutions vice president.
“In this competitive segment, maintaining volume is a good sign for the model and brand,” he said.
Frehsee said his Rogue allocations are 20 to 25 percent higher than a year earlier, adding the factory is doing better with the model mix. Nissan is “shifting production to the more affordable S and SV trims, which is great for dealers and customers,” he said.
But the improving supply, rising interest rates and stiffening competition are manifesting on Nissan dealership lots.
Drury said the time it takes to move Rogue inventory has nearly doubled since the beginning of the year, to 62 days in June.
“Nissan is producing more Rogues than it can sell,” he said.
SOURCE: Automotive News