NASHVILLE -- After rolling back factory prices on several popular nameplates in May, Nissan is reaping financial benefits.
The price cuts are resulting in lower incentives and higher residual values without hurting transaction prices, says Dan Mohnke, Nissan's director of marketing operations.
Nissan's average per-vehicle incentives were $2,088 last month, as reported to J.D. Power and Associates, $539 per vehicle lower than in April, just before the price cuts.
At the same time, transaction prices are $231 higher, Mohnke says. Last month, the average was $24,114 per vehicle, up from $23,883 per vehicle in April, just before the repricing.
"So we're right where we intended to be," Mohnke says. "We lowered our visual prices to the consumer without affecting our transaction prices."
The price reduction was startling for the industry. Nissan cut prices of seven of its best-selling nameplates -- the Altima, Maxima, Rogue, Pathfinder, Sentra, Murano and Armada -- to get the products more in line with competitors on Internet shopping sites.
Online search engines typically deliver results grouped by price. Nissan was concerned that many of its models were priced too high to appear near the top of search results.
The cuts varied by nameplate, ranging from $580 on the Altima mid-sized sedan to $4,400 on the Armada SUV.
The move stirred controversy in the domestic industry when critics claimed the price cuts were evidence that Nissan Motor Co. was using the recent depreciation of the Japanese yen to gain a competitive advantage.
But all of the repriced nameplates except the Rogue and Murano are built in North America, where they do not benefit from the yen's exchange rate, Mohnke counters. And production of the Rogue and Murano are being moved to the United States.
Mohnke says that residual values of the repriced nameplates also are benefiting.
Since the price change, the Rogue's residual value has gained 5 percentage points, the Maxima's has picked up 4 and the Murano's has added between 3 and 4, he says.
"That's favorable to us in offering leases, which use the residual as a calculator," Mohnke says. "Now we have a higher percent that we can work with to create a more competitive lease."
He says the price reductions also should boost Nissan's certified used-vehicle business, thanks to higher residual values as vehicles come off lease.
"Nissan was going down a path of higher visual prices than our competitors, and it was causing other issues with residual values and our incentive spend, and we've now corrected that," Mohnke says. "So we're now competitive on our visual price, and we have now higher residual values and competitive incentive spend as well."