Beware of Greeks bearing gifts
Laocoön, referring to the Trojan Horse that bedevilled the ancient city of Troy in Virgil’s Aeneid
Nissan USA just this week offered up the industry’s latest twist in automotive affordability plans. It’s called SignatureFlex. For all the company’s talk of “flexibility” and “data-driven demand,” it is, for lack of a better definition, basically an ultra-low-mileage lease program. Sign up for a Pathfinder, Rogue, or Rogue Sport (a.k.a. the Qashqai, here in the Great White Frozen North) and, as long as you’re willing to limit your driving to 5,000 miles per annum, has Nissan got a deal for you.
According to Jim Trude, vice-president of Nissan Motor Acceptance Co (NMAC), the company’s research reveals consumers want these lower-mileage leases. Last year, his company introduced 10,000-mile leases — down from the normal 12,000 miles — and they’re already, according to Automotive News, the most popular option for Nissan’s new-car hires. The new SignatureFlex program would require limiting yourself to just 640 kilometres a month.
That’s about 20 kilometres a day, enough, in Toronto, to at least get to the Longo’s, and not much more. Hell, if Nissan were leasing its new Ariya through SignatureFlex, it would mean you’d only have to charge the 490-kilometre battery-powered SUV once a month. When I said “ultra-low-mileage,” I wasn’t kidding.
Now as any lessee can attest, the penalty for going over your proscribed mileage limit is pretty punitive. Legion are the owners of high-mileage leased cars panicked into parking their cars in the last few months of their about-to-expire contract. Here, too, Nissan has a solution, offering you the “flexibility” to change your lease limits mid-way through the deal. NMAC will even offer to monitor your mileage — oh, joy, even more surveillance of your every mile — so they can predict when you might need to extend you lease limit.
Sounds like too good a deal to pass up, right? You’re working from home, so you’re not commuting anymore. Gas is expensive, so you’re already trying to limit your mileage. Someone’s going to reward me for something I’m already doing? Where do I sign up?
Except that in doing so you’re forgetting the first maxim of the automobile purchase process, namely that dealers always make their money before you save yours. Or, as my all-time favourite automotive-industry meme goes, “We cheat the other guy and pass the savings along to you.”
Used cars are displayed at a dealership on June 10, 2022 in New York City. Photo by Spencer Platt /Getty
First off, knowing automotive financing business as I do, you can bet your sweet patootie there’s a very healthy per-mile profit built into your supposedly cost-savings lease. Second of all, the pandemic’s supply-chain woes have completely up-ended new car sales, so much so that Nissan America is obviously banking on a steady supply of super-clean, ultra-low-mileage lease returns to fill what is currently an empty dealer lot.
Even before the pandemic, when mileage penalties were typically 25 cents per mile south of the border, the sharp-penciled actuaries I know tell me those extra miles only cost them 15 cents at the wholesale lot, and you can be damned sure that margin hasn’t decreased in this tight market. Like I said, no matter how good a deal you’re being offered, the dealer is always making his money first.
The bigger issue, however, is that we are becoming ever more focused on monthly payments at the expense of total cost of ownership
That’s not to say that there won’t be some people that will be well served by SignatureFlex, though, for the life of me, I can’t figure out why anyone would opt for a new car (instead of used) when they know they’re not going to be driving more than 20 klicks a day.
The bigger issue, however, is that we are becoming ever more focused on monthly payments at the expense of total cost of ownership. Motor Mouth has long decried the debt trap that is long-term financing, and yet we now extend auto loans out to 96 months just so the monthly stipend is 50 bucks cheaper.
And, despite whatever headline my editor affixes to this screed to attract Google’s attention, I honestly don’t blame Nissan for offering this new leasing program, no matter how little sense a 20-kilometre-a-day limit makes to me. The company is simply responding to a consumer laser-focused on monthly demand.
New Nissan sedan vehicles on a dealer lot in Muncy, Pennsylvania, on December 30, 2018. Photo by Kristoffer Tripplaar /Sipa USA via Reuters
Indeed, whether it’s a low-mileage lease like SignatureFlex — which Nissan Canada has yet to decide to bring to Canada — or the 96-month loans that have become so popular here in the Great White Frozen North, the real issue is that consumers seem bound and determined to drive more car than they can afford. Decades of cheap money and a booming economy have seemingly put a paycheck in every pocket, and a Mercedes in every parking spot.
Hell, Vinfast Canada, the fledgling Vietnamese electric carmaker, is getting around the EV affordability problem by offering to sell you a car and then have you pay an additional monthly rent for its battery. Yes, even after spending, say, $50,850 on one of its new VF8 midsized crossovers, you still owe the company $139 each and every month for the lithium-ion that powers it. And, if Chinese automaker Nio’s experience in Germany, the Netherlands, Sweden, and Denmark bodes well — where you will not be able to buy, only rent, one of its EVs — perhaps leasing, whatever annual mileage limit compromise you make, is the future.
So, no matter how assiduously you claim the ‘fix’ is in, corporate greed is not the impetus for lack of affordability in the auto segment. Neither is it automakers and their supposedly craven dealers. It’s not even those supposedly rapacious oil companies whose exorbitant pump prices are making your F-150 “suddenly” unaffordable. The real problem is that we keep buying cars on what my mom used to call the “never-never.” The real reason that Nissan is offering this new ultra-low mileage lease is that we’re all so darned determined to drive beyond our means.
Keyword: Motor Mouth: Why Nissan's so keen to sell low-mile leases