4 brands set CPO sales record to keep pace with off-lease volume

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CARY, N.C.  - 

Four automakers posted new all-time highs for monthly certified pre-owned sales in March; a month where Autodata Corp. determined the industry turned the second-highest amount of CPO units ever.

And perhaps the industry will need other OEMs to join that performance level in order to keep up with the volume of off-lease vehicles hitting the wholesale market.

Autodata reported that four automakers — Fiat Chrysler, Kia, Maserati and Nissan — closed the first quarter with their highest CPO sales total ever for a single month. The firm indicated Fiat Chrysler turned 23,266 certified units as Nissan moved 18,509 CPO models. Kia recorded 7,513 certified sales as Maserati turned 79 CPO models.

In fact, Autodata mentioned to Auto Remarketing that Fiat Chrysler’s CPO sales total compiled during the first quarter also set an all-time high for the OEM, as its franchised dealers retailed 58,398 units.

All told, Autodata reported that dealers retailed 243,277 CPO units in March, off by just 0.3 percent year-over-year when the all-time sales record was established. That’s when the industry delivered 243,944 certified models.

The March figure also soared past the CPO sales total recorded during the previous month by 15 percent.

For the quarter, Autodata indicated the CPO sales figure came in at 647,373 units, edging 0.1 percent higher compared to the first quarter of last year. The amount also was 0.8 percent higher than the fourth quarter of 2016.

Analysts pointed out that there were 27 selling days in March of this year and last year as compared to just 24 in February of this year. The March sales figure computed into a daily selling rate was 9,010, according to Autodata.

Looking deeper at the March data on a year–over-year basis, analysts noticed that domestic brand share fell 1.8 percentage points to 35.4 percent, as European share increased 1.2 points to 16.3 percent. Autodata added the Asian share edged up 0.7 points to 48.3 percent.

No matter which brand has share, Edmunds senior analyst Ivan Drury explained to Auto Remarketing that it appears OEMs and their dealers are going to have to keep this record or near-record setting pace in order to keep off-lease units from sitting in inventory for too long.

“While we've seen a consistent rise in off-lease each year, it appears that CPO sales are not trending as closely with off-lease as once predicted,” Drury said. “This could be an indicator that we’ve begun to saturate the market. 

“CPO, on an overall level, is utilized as a way to distinguish and show differentiation from the rest of the used market, but as we have waves of relatively new vehicles of similar trim levels and mileage, it could be less of a selling point and just seen as added cost when there are so many comparables,” he continued.

Kelley Blue Book managing editor Matt DeLorenzo also looked cautiously at the relationship between off-lease wholesale volume and CPO retail trends.

“The glut of off-lease vehicles needs to be managed carefully because these are the units that provide most of the CPO inventory, thanks to annual mileage caps that make these vehicles more desirable and easier to warranty than high-mileage units,” DeLorenzo said. “These CPO units really don’t prime new-vehicle sales other than being able to flip the current lessee into a new vehicle. That used unit as a CPO becomes an entry-level vehicle to a buyer who may not be able to afford a new model of a particular brand.

“If incentives become so heavy that those buyers are able to actually afford a new vehicle, then yes, there will be an impact,” he continued. “However, manufacturers have the opportunity to manage their off-lease volume by storing cars (that’s already happening) to keep inventories down and prices and margins up. Dealers are more than happy on this count because their margins are usually greater on CPO than new vehicles.”

And as DeLorenzo mentioned, the incentive moves automakers are using to turn new models could leave a rippling impact over to the used department trying to retail CPO units.

“There is no question that huge rebates will have an effect on the used-car market, and CPO vehicles will not be immune to those pressures,” DeLorenzo said. “That said, there’s more to the CPO proposition than just price. Some rebates may be on only the entry-level versions of a particular model or may be offered regionally. A buyer may still opt for a better equipped CPO car that could come in at or just under the price of an all-new car with less equipment. And that’s not to say that makers will be looking to re-lease their CPO cars at attractive rates (this is a small slice of the market, but it could grow) or offer other non-cash incentives and spiffs like extended warranties and subsidized financing to make the CPO deal compelling.

“Still, we are likely to see prices trending downward on both CPO and non-CPO vehicles over the next year as some 3.1 million vehicles are expected to return to the market off-lease,” he continued. “However, overall CPO volumes may remain fairly stable because as a marketing tool these programs are expanding, so the growth in CPO with manufacturers offering or expanding their programs will probably mitigate against a dramatic drop-off in CPO activity.”

Drury also touched on how consumers are weighing the option of purchasing a CPO unit versus a new model, especially one that might have a substantial amount of cash on the hood.

“Consumers who shop both new and used/CPO vehicles are research-intense and tend to spend much greater amounts of time gathering information and searching inventory than those who strictly shop new or used,” Drury said. “Some of this stems from simply having more options, but for a consumer looking to get the best bang for their buck comparing used, CPO and new is vital.

“That said, each consumer also has a number in their head at which point the price premium for a new vehicle over a used/CPO is justified,” Drury went on to say. “Factoring in incentives does add a bit of complexity, but for vehicles with steep new-car discounts there is a much greater chance at hindering the ability to sell a CPO unit or even a standard late model used vehicle.”

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