There were just under 40,000 Toyota Certified Used Vehicles sold in the program’s first year of operations back in 1996.

Two decades later, TCUV is gunning for 400,000 certified sales.

With TCUV celebrating its 20th anniversary in April, Auto Remarketing caught up with Bill Fay — the group vice president and general manager of the Toyota division at Toyota Motor Sales, U.S.A. — and Tom DeLuise, the national TCUV/TRAC operations manager.

In a phone interview, Auto Remarketing and the Toyota executives covered the program’s beginnings, its progress over the years, the incredible traction CPO has generated industry-wide and more.

Initial goals of TCUV

Just three years after luxury cousin Lexus officially launched its program during CPO's infancy, the Toyota brand rolled out a certified offering of its own in April 1996.

In those days, most of Toyota’s new cars were being sold in the traditional sense; leasing was not extremely common for the brand, Fay said.  However, as leasing gained ground for Toyota, CPO was an avenue to “protect the whole lease cycle,” he said.

“But it also was a way to create an additional level of peace-of-mind for customers that were looking for pre-owned vehicles that wanted some more assurances, wanted the additional process that these vehicles went through to be checked and upgraded,” Fay said. “I think it all kind of took off as an opportunity to provide another level of used cars to protect the whole lease cycle as it became more and more popular, and really build some value in pre-owned vehicles at the Toyota dealerships that helped the overall Toyota brand.”

Where change is most evident

The sheer sales volume that has accelerated both at Toyota (going from 40,000 to 400,000 annual CPO sales in 20 years) and the industry at large in the past two decades may be the most obvious sign of change.

But there’s more to it than that. Behind the numbers, there’s a different mindset among consumers and a “refined” approach by dealers.  

When asked where the change in TCUV is most evident after 20 years, Fay said:  “We’ve got a steady flow of customers that come in and look for those vehicles now. So, there’s a real awareness and understanding out there in the public that the certified used brand at Toyota and at other manufacturers is a real, viable brand that adds some peace-of-mind and value.”

He continued:  “Clearly we’ve identified some good opportunities to work together with (Toyota Financial Services) to put some marketing support in place to really add even more value to these vehicles. I think the process within the dealerships has really been refined over the years. They know how to take these vehicles; they know what a certified used vehicle is.

“When they trade for it or they buy it, they’re really efficient at taking these vehicles through their checks and making the necessary upgrades. So, it’s really become, at most of our dealerships, a real efficient process in certifying vehicles, being able to incorporate them into the overall retail process, identify and build some value for the consumer and turn it into a win-win for the dealership and for the consumer.”

Along those same lines, we posed this question to Fay: if you were to ask a Toyota dealer why they appreciate TCUV, what might the dealer tell you?

“I think they’ll tell you that it’s profitable for them, it builds retention for the brand, there’s a value and peace-of-mind for their consumers that they value out of these TCUVs,” Fay said.

“I think they understand that it helps us manage the whole lease cycle; so, it protects residuals, it allows us as a company to be aggressive in how we support new-vehicle sales, primarily through the leasing front, because we’re then able to better manage those off-lease returns in a positive and proactive way. I think that they understand that they’re doing their part to help support the brand. I think they understand that it brings new people to the brand,” he added.

In fact, almost two-fifths of folks buying Toyota certified vehicles are purchasing that brand for the first time, Fay said.

Dealers, he adds, understand that TCUV customers are much more likely to buy TCUV or a new Toyota the next time they’re in the market.

“Probably close to 75 percent of those people we’re able to keep in the family,” Fay said.

Overall industry gains

According to CPO sales data that Autodata Corp. provided to Auto Remarketing in 2011, there were 1.29 million certified units sold industry-wide in 2002, which was the first full year of complete CPO sales data (with a very brief patch of incomplete data in 2003).

Less than a decade-and-a-half later, there have now been five consecutive years of record certified pre-owned sales. There were 2.55 million CPO cars sold last year, according to Autodata, and 2016 year-to-date sales are up 2.5 percent through February.

So what is driving this rapid CPO adoption?

For one, the advantages of buying certified are much more well known in the mainstream and consumers have greater access to learn about these cars through the Web, Fay said.

Going certified, he said, has become a ““much more common and accepted way to acquire a vehicle.”

Perhaps even more telling, Fay said shoppers are proactively looking for these cars.

From the OEM standpoint, it gives them a way to manage the leasing cycle, he said.

That is especially important, given the current leasing environment.  In the fourth quarter, lease penetration notched another all-time record, representing 33.6 percent of all new-car financing, according to Experian Automotive.

In a separate report from Edmunds.com, director of industry analysis Jessica Caldwell said there were approximately 346,800 leases in February. That represents nearly a third of new-car transactions, according to the data.

All of that follows an already amped-up stock of lease returns. There are approximately 3 million lease returns on tap for 2016, DeLuise said. This would beat the year-ago figure by more than 700,000 units, he said.